Investing can often feel like navigating a labyrinth, especially when market predictions fail and your portfolio takes a hit. Investors, swayed by so-called experts, may find their faith in their investing strategy fading as they face losses and uncertainties. It is critical for investors to build their investing strategy on prudent investing principles, so they are not easily swayed by market turns or promises of quick fixes. Investors can stay the course and maintain confidence in a prudent investing strategy, despite the noise. It takes courage and fortitude to remain disciplined over a lifetime and it is critical for creating an opportunity for lasting success.
The Mirage of Market Predictions
Market predictions often allure investors with promises of high returns and quick gains. However, these predictions are usually nothing more than guesses. “When someone tells you they know what the market is going to do in the next twelve minutes or twelve months, run – don’t walk – the other way,” says Mark Matson, Founder and CEO of Matson Money. Financial “experts,” who often consider themselves market seers, rarely face consequences when their forecasts miss the mark. They chalk up failures to bad luck or poor timing and move on to their next prediction. This scenario is reminiscent of tribal rainmakers who, when their rain dances fail, blame external factors or minor missteps instead of acknowledging the flaws in their methods.
In the stock market, these so-called experts exhibit similar behavior. When their predictions fail, they blame the company, the industry, or external market conditions. The investors who trust these forecasts are usually the ones who suffer, bearing the brunt of the financial loss.
The Prediction Racket: A Profitable Illusion
The prediction racket is a thriving business. From investment newsletters and websites to social media posts and 24/7 cable “news” networks, there’s no shortage of so-called experts claiming to have the next big tip. These predictions often capitalize on fear, urging investors to act quickly before missing out on an opportunity. “You are in a battle for your financial well- being and you do have enemies,” says Matson. “Your primary adversaries are the Wall Street behemoths who can profit and prosper by keeping you mired in problems.” The fear of failure and the complexities of the financial market make it easy for investors to fall prey to these tactics. Financial services firms, whose success often depends on anxious investors, offer a semblance of control and expertise, further luring investors into the dangerous prediction game.
Investing vs. Speculating
To help maintain faith in your investing strategy, it’s essential to differentiate between investing and speculating and gambling with your financial future. A prudent investor plans for the long term, focusing on life-long goals rather than short-term market movements. This involves sticking to a well-mapped investing strategy and resisting the urge to chase instant gains. In contrast, speculators seek quick profits, often based on market predictions. This approach can lead to significant financial losses and undermine long-term wealth creation.
David Booth, CEO and Founder of Dimensional Fund Advisors, aptly states, “The best way of ending up with a small fortune is to start with a big one.”1 Speculating can lead to wealth destruction, even if occasional wins can create the illusion of success.
How to Avoid Speculation and Focus on Investing
Here are a few guidelines that can help save you from speculating with your hard-earned money:
Ignore Predictions: Avoid anyone claiming to predict the market’s future. Predictions are often wrong and can lead to poor investment decisions.1
Don’t Try to Time the Market: Market timing is incredibly difficult. Even if you get it right occasionally, it’s nearly impossible to do so consistently.1
Stay Disciplined: Successful investors maintain discipline, avoid emotional decisions, and focus on long-term goals rather than short-term market movements.1
Building a Long-Term Strategy
To build a prudent portfolio for the long term, start by working with your advisor coach to build an investing strategy based on empirically tested academic investing principles, which can help you eliminate the temptation to speculate and gamble.
It’s crucial to understand how markets work and design a diversified portfolio tailored to your personal risk tolerance. This requires a commitment to lifelong learning and the discipline to stick to your plan, even during market volatility. Join us for our free, two-day educational workshop, the American Dream Experience, to discover what academic investing is, how it works, and how it can help fulfill on your purpose for your life and your money.
Investing is not about making quick, speculative gains. It’s about building a solid financial foundation that supports your True Purpose for Money®, whether that’s retirement, your children’s education, or charitable giving. By keeping Wall Street’s predictions out of your investment decisions and focusing on a disciplined, long-term strategy, you can have an opportunity for peace of mind around money and investing.
Sources
- Matson, M. (2013). Main street money: How to outwit, outsmart & out invest the wall street bullies. McGriff Pub.
DISCLOSURES:
This content is based on the views, opinions, beliefs, or viewpoints of Matson Money, Inc. This content is not to be considered investment advice and is not to be relied upon as the basis for entering into any transaction or advisory relationship or making any investment decision.
All of Matson Money’s advisory services are marketed almost exclusively by either Solicitors or Co-Advisors. Both Co-Advisors and Solicitors are independent contractors, not employees or agents of Matson.
Other financial organizations may analyze investments and take a different approach to investing than that of Matson Money. All investing involves risks and costs. No investment strategy (including asset allocation and diversification strategies) can ensure peace of mind, guarantee profit, or protect against loss.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS