Economist Forecasts vs. Great Investment Minds

 As we meet the middle of 2018, we will see all sorts of predictions about the second half of the year as well as predictions about the next few years.   Humans love mental short cuts. Frequently we make decisions based on the opinions and conclusions of others, especially if we view them as “experts”.

 

When it comes to the economy and markets, we have plenty of experts to look to for guidance.  However, one fundamental truth is that no economist offering predictions is right.  If fact, according to research conducted by Werner De Bondt, economists forecast have an average 12-month forecast tracking error of 15%!  His conclusion is that even the best forecasts are terrible. 

Here are some of the best investment minds in history offering insights on timeless wealth building principles:

 

KEEP YOUR EMOTIONS IN CHECK

“The investor’s chief problem – and his worst enemy – is likely to be himself.  In the end, how your investments behave is much less important than how you behave.” ~ Benjamin Graham

 

“A lot of people with high IQs are terrible investors because they’ve got terrible temperaments.  You need to keep raw, irrational emotion under control.”  ~ Charlie Munger

 

“Your success in investing will depend on part on your character and guts and in poart on your ability to realize, at the height of the ebullience and the depth of despair alike, that this too, shall pass.”  ~ Jack Bogle

 

DISREGARD FORECAST

“Thousand of experts study overbought indicators, head-and-shoulder patterns, put-call ratios, the Fed’s policy on money supply….and they can’t predict markets with any useful consistency, any more than the gizzard squeezers could tell the Roman emperors when the Huns would attack." ~ Peter Lynch

 

“The function of economic forecasting is to make astrology look respectable.” ~ John Kenneth Galbraith

 

“I make no attempt to forecast the market – my efforts are devoted to finding undervalued securities.” ~ Warren Buffet

 

DON’T TRY TO TIME THE MARKET

“The idea that a bell rings to signal when to get into or out of the stock market is simply not credible.  After nearly fifty years in this business, I don’t know anybody who has done it successfully and consistently.  I don’t even know anybody who knows anybody who has.”  ~ Jack Bogle

 

“Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves.” ~ Peter Lynch

 

“Though tempting, trying to time the market is a loser’s game.  $10,000 continuously invested in the market of the past 20 years grew to almost $40,130.  If you missed just the best 30 days, your investment was reduced to $8,332.“ ~ Chris Davis*

 

BE PATIENT AND THINK LONG TERM

“The stock market is a device to transfer money from the impatient to the patient.” ~ Warren Buffet

 

“Invest for the long haul. Don’t get too greedy and don’t get too scared.” ~ Shelby M.C. Davis

 

“The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and behavioral discipline that are likely to get you where you want to go.” ~ Benjamin Graham

 

“Waiting helps you as an investor and a lot of people just can’t stand to wait.  If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.” ~ Charlie Munger

 

A MARKET CORRECTION IS AN OPPORTUNITY

“A market downturn doesn’t bother us.  It is an opportunity to increase our ownerships of great companies with great management at good prices.” ~ Warren Buffet

 

“The intelligent investor is a realist who sells to optimist and buys from pessimists.” ~ Benjamin Graham

 

“You make most of your money in a bear market, you just don’t realize it at the time.”  ~ Shelby Cullom Davis

 

 

MARKETS FLUCTUATE. STAY THE COURSE

“History provides a crucial insight regarding market crisis: they are inevitable, painful and ultimately surmountable.”  ~ Shelby M.C. Davis

 

“In the short run, the market is a voting machine. In the long run, it is a weighing machine.”  ~ Benjamin Graham

 

“A 10% decline in the market is fairly common – it happens about once a year.  Investors who realize this are less likely to sell in a panic, and more likely to remain invested, benefitting from the wealth building power of stocks.”  ~ Christopher Davis

 

 

Disclosures

*Source: Davis Funds. Period cited is from 12/31/1997 to 12/31/2017.  The market is represented by the S&P 500 Index. Investments cannot be made directly in an index. Quote source: Davis Funds

 

Any opinions expressed in this forum are not the opinion or view of American Portfolios Financial Services, Inc. (APFS) and have not been reviewed by the firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors. Herr Capital Management does not provide tax advice and this content should not be regarded as individual tax advice. Any links contained are to external websites we believe to be reliable. Herr Capital Management is not responsible for any content or information contained on external websites. Securities offered through American Portfolios Financial Services, Inc.(APFS) Member FINRA /SIPC. Investment Advisory Services offered through Herr Capital Management LLC a Registered Investment Advisor which is not affiliated with APFS. APFS.

 

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