Tips To Avoid Ridiculous Stock Predictions

    Published: 06-16-2009
    Views: 11,497
    Financial advisor Ric Edelman explains why you shouldn’t rely on stock predictions.

    Ric Edelman: There are lots of ways you can pick stocks. Some love to examine past performance; others will tell you whether to buy or sell depending on which political parties in power or what movies are playing at the theater. Now there are a zillion ways to predict stock. You can find a pattern pretty much anywhere if you look hard enough. Amazingly some of the wildest predictions aren't even based on the stock market; instead they focus on pop culture.

    One method tracks pop music. This theory says, that the Beatles breakup in 1970 was the sign of a market bottom. Another says that headlines predict the rise and fall of a stock market. If women around you are wearing short skirts, the market will rise but when headlines go below the knee, prices will fall, dead over heels the higher heel, the higher the market or you can go to the movies.

    One rule says, that the more horror films Hollywood releases the worse the stock market is going to be. Or here is one for sports fans, the market will rise when the original NFC team wins the Super Bowl. And if the Oakland A's win the world series the market will crash, I can go on. The year of the pig on the Chinese calendar is good for small cap stocks. Man space launches makes stocks rise, but reentry bring stocks back down, it sounds crazy right?

    The crazy thing is that all of these predictions came form researchers and the media then, reported on them as news. People believe what they see in the media. Some actually invest based on this nonsense, don't let it happen to you it's not just TV pundit's who give that advise. So called experts do too. There are thousands of economists, analysts and traders out there; any 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%, no body believes TV weather man, we're not shocked when sports writers get it wrong. So why do believe people who will tell us what will happen in the stock market? All stock picking systems are stupid. Their creators may call them predication, they may them official sounding names but in the end they're really all just bias.