Do you get attracted by market forecasts?

Do you get attracted by market forecasts?


July 24, 2017

“Bullish on market, see Sensex at 32000 by December 2016″ – Citi Jan 13, 2016

“Citi’s December 2017 Sensex target at 31500, implies 5% upside”- May 05, 2017

We often come across news headlines such as above. The “expert” forecaster’s ever changing goal posts.

Forecasts are everywhere. The financial markets are inundated with forecasts by the so called “experts” either on TV or in print media. This is not an article against any single forecaster. I am just trying to show how wrong the so called experts can go while predicting the financial market’s movement.

We as human beings by nature look for certainty, in an uncertain future. This is the reason, unfortunately as investors we tend to give far greater weight to these “predictions” in print or on TV. As Howard Marks of Oaktree Capital wrote in his memo to clients on the same topic “The opinions of experts concerning the future are accorded great weight . . . but they’re still just opinions.

Many of my friends and relatives come up to me and ask questions like “Is the Sensex going to touch 35000 by Dec 2017?”, Or “Is RIL stock going to cross 2000 this month?” My answer to all such questions is unequivocally “I don’t know”.

I would always advise everyone to not invest on basis of forecasts. Always do your own due diligence before making an investment decision. As per a legend, one of the top bankers in the world, JP Morgan when asked about what stock market will do, replied, “It will fluctuate”. If one of the top bankers in the world doesn’t know, we better avoid falling into that trap.

Having said that, there is a difference in forecasting and making a probability based judgment. Judgment based on proper due diligence is far better than opinion of experts. We as investors should avoid the noise surrounding us. We should try to focus on our own analysis of important and relevant information to do our investments.

I would close this article with an excerpt from the Howard Marks’ Memo titled “Expert Opinion” which is a huge inspiration for this article, and, also because I could not have put it any better.

One of the most powerful things we can do as a human being in our hyper connected, 24/7 media world is say: “I don’t know.” Or more provocatively, “I don’t care.”

Not about everything, of course –just most things. Because most things don’t matter, and most news stories aren’t worth tracking

Kshitiz Jain

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