Ric Edelman: We are talking about the stock market and market predictions, and why you should ignore them.
In 1996 U.
S. News & World Report warned "Investor beware!
" Beware of what, we have gained 18% after that cover was printed and continued to rise for the next three years.
How about Money Magazine, it's August 1997 cover screamed, "Don't just sit there - sell now!
! If you would follow that advice you would have missed two years of gains.
Fortune magazine warned in September of 1998 something they call The Crash of '98, it never came; and then after we went through a three-year bear market that started in 2000, US Today asked on October 2, 2002, "Where's the bottom? No end in sight!
" Turns out, that was the bottom, pretty much from then on prices began to rise and they kept doing so for the next five years. Whoops!
It's not just the print media that gets it wrong either. A study by Barrons found that Jim Cramer, he is the guy who offers tips every night on TV, he tends to offer bad tips. Barrons' research found that over a two-year period Cramer's picks went up only about half as much is the overall stock market.
This is not an isolated instance. Another study showed that investors who follow media recommendations lose an average of 4% over the next six months. It's not just TV pundits who give bad advice, it's so-called experts do too. There are thousands of economists, analysts and traders out there, at a given moment someone is bound to be right; but individual experts are rarely right twice.
One guy labeled as a Top Strategist, said that stock prices would rise 14% in 2008, instead the S&P 500 stock index fell 39%.
Nobody believes TV weather, man! We are not shocked when sports writers get it wrong. So why to believe people who tell us what will happen in the stock market?