Flickr user 401(K) 2012
As we entered 2012, there were several common themes sounded by Wall Street and the financial media. Many investors take such forecasts, or wild guesses, to heart and plan their portfolios around them. My goal is to hold these predictors accountable and see if their words have any value by reviewing their predictions each quarter. Let's see how they fared during the third quarter.
Image courtesy of Flickr user 401(K) 2012
Next: Investing in Europe
And your point is?
The markets know this is true and all available information is built into prices, including the possibility of unforeseen events, the known unknowns and the unknown unknows if you will. Prices include estimates of events happening or not and then they basically instantly adjust when we know the outcomes.
The investor's focus then should not be on trying to manage returns, which cannot be controlled, but on managing the amount of risks you take, diversifying those risks as much as possible, keeping costs low and tax efficiency high.
Unfortunately the vast majority of investors focus on trying to manage returns, the one thing we cannot control. They end up playing a loser's game.
Best wishes
Larry