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Advice From Market Gurus? Don't Listen!

As I mentioned in an earlier post, you should consider economic forecasts to be closer to entertainment than information you can use for investing. If you're tempted to make investing moves based on these "gurus," consider the case of the latest forecasting genius.

Our current economic conditions have turned New York University professor Nouriel Roubini into a star. Ever since he correctly predicted the current economic crisis, he has been sought after by some of the world's most prominent media outlets for his opinions. He has even parlayed his new fame into making his mark in New York's social scene.

Before you begin (or continue) seeking opinions of forecasters like Roubini, it is important to note their track records. In Roubini's case, he also predicted a bust due to Hurricane Katrina, then another one tied to trade imbalances. Neither occurred. "Nouriel Roubini has been singing the doom-and-gloom story for 10 years. Eventually something was going to be right," Nariman Behravesh, chief economist for IHS Global Insight, told Portfolio.

So what does Roubini's continued gloomy predictions about the economy mean for your portfolio? Nothing. First, there's no guarantee his predictions will be correct, and his track record shows his predictions are just as likely to be wrong (if not more so). Also, basing investment decisions on what you or others think may happen to the economy isn't the best strategy for creating a sound investment plan. The market has already incorporated future economic conditions into prices.

Your best bet for your portfolio remains the same: Ignore the forecasts from so-called "experts" and stick to your well-designed investment plan.

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