Can Financial Gurus Forecast the Future?
Financial Gurus – you see them everywhere. They pop up on your TV screen and invade your social media. “Buy this, sell that. Here’s what the future brings.” But can they really forecast the future of the market?
Larry Swedoe has authored 18 books on investing and decided to dive into the advice given by these Financial Gurus. His results?
Investors need to be aware that “TV stock market Gurus” are employed for entertainment value rather than investment advice.
Studies show that the accuracy of TV Guru’s forecasts is less than 50%. In other words, you could toss a coin and get better advice on timing the market. So why do media companies focus so much attention on their predictions? Because it attracts the public’s attention and gets you to watch the show.
This chart in market forecast accuracy shows results similar to random outcomes:
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* Study sources: The Livingston Survey, The CFO Survey, The Nagel and Xu Survey
Here are five of the more famous “gurus” along with their forecasting score.
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Guru |
Forecasting Score |
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Jeremy Grantham – Chairman of GMO, a global investment firm |
48% |
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Dr. Mark Faber - publisher of The Gloom, Boom and Doom Report |
47% |
|
Jim Cramer – CNBC |
47% |
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Gary Shilling – Forbes columnist |
38% |
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Abby Joseph Cohen – former chief U.S. investment strategist at Goldman Sachs |
35% |
According to Warren Buffett, listening to market predictions of others is dangerous, because it may blur your vision of the facts that are truly important to you.
Are there financial professionals you can listen to?
Financial professionals that have your best interest at heart are those that really know you, understand your goals and risk tolerance, determine your investment time frame and develop a holistic plan and investment strategy specifically for you. They don’t try to time the market with their own predictions.
We believe that following time-tested financial principles leads to success. That’s what we do.