There are a lot of articles floating around right now reviewing the market forecasts of ten years ago, such as this one by Brett Arends in the WSJ.
Hands up if you had Southwestern Energy.No? How about XTO Energy? Range Resources? Precision Castparts?
You should have. These were top stocks of the decade in the Standard & Poor’s 500-stock index. Ten years ago, the smartest thing you could have done with your money was to invest in these. Each $1,000 invested then would be worth tens of thousands today.
Now look at the stocks the experts told you to buy instead.
The most widely recommended — according to a quick survey at the time in the Washington Post — were America Online, Cisco Systems, Qualcomm, MCI WorldCom, Lucent Technology and Texas Instruments.
Ahem.
Any people who invested in that portfolio have lost about two-thirds of their money. The average stock picked at random was up 3%, including dividends
The best investments are usually the ones nobody is talking about. Ten years ago, everybody was talking about which technology stocks to buy. Almost nobody was talking about gold. The Bank of England could barely give the stuff away at $260 an ounce.
Why are people so fascinated with trying to forecast the future? I don’t get it. The track record of forecasters is utterly pathetic. Do people not know that there are more enlightened methods of investing? The data supporting trend-following, including the compilation on our website, is legion. Trend following has warts as well, but those can be relatively easily understood and should be evaluated within the context of long-term results. Those investors who accept the limitations of trend following, and commit to the process for the long-run, are in a remarkably better position that those who try to divine the impossible.
