Short-term market predictions, say one day, one week, one month or even one year, are great examples of uselessness. Long-term predictions can be reliable, however.
On January 24 of this year, writing in Market Watch
, Brian Livingston published an insightful article summarizing Warren Buffet’s, Robert Shiller’s, James Tobin’s (the last two are economic Nobel laureates) and other renowned investors’ stock market predictions for the next decade. Below, you can see some of their annualized growth rate forecasts:
- Buffett: -2%
- Shiller: +2.6%
- Tobin: -0.5%
One of the few stock market certainties is reversal to the mean. The chart below shows the fluctuations of the S&P 500 over the course of the last decade with the straight line representing the mean.
It is easy to see that the market has spent as much time above the mean as it has below the mean with a strong upward movement — about 400%, over the decade! We are long overdue for a major long-term reversal. Our 10/22/2018 blog dealt with the prospects of a market correction
Now, the Monday Morning Millionaire Program recommends investing in the US market as a whole by buying an exchange-traded fund (ETF) which mirrors the S&P 500 which itself mirrors the US economy. Does that mean that we are putting all our eggs in one basket?
In his justly renowned book The Battle for Investment Survival,
Gerald Loeb recommends that investors put all their eggs in one basket and then watch that basket. Is that a sound recommendation? How exactly does one watch that basket? Will the opposite of putting all one’s eggs in one basket, that is, diversification, provide protection? Many advisors suggest that approach.
The Monday Morning Millionaire Program has one evidence-based answer for mid-career members and another for retired members.
You need to login to view the rest of the content. Please Login
. Not a Member? Join Us