Punxsutawney Phil is arguably the most well-known prognosticator in America. Groundhog Day was established in 1887, held annually on February 2nd. A large crowd will wait with baited breath to see what this famous oracle is going to predict. At Gobblers Knob, at 7:20 am, the crowd will be awaiting the fame rodent’s prime indicator, a shadow. If he sees his shadow then six more weeks of bad weather and he heads back underground. If no shadow then it’s time to stay aboveground and spring is closely approaching.
What’s curious about Phil’s predictions are they’ve only been right 39% of the time. This still beats the bulk of mutual fund managers who only have about a 15% winning track record.
Of all the Wall Street bullies, the prognosticator is by far the hardest one to coach investors about. The reasons, these calculating gurus always have point-counterpoint data to support their many predictions. This is the group that likes to imply they have some insight that the rest of us don’t. I often wonder what motivates this group to share their wisdom and insight if they really knew what was going to happen moving forward in the stock market. Why would they need to share it with anyone? The answer is they don’t know. Their motivation is to sell the books, magazines, inside newsletters, etc.
These bullies want to imply that returns come from managers and not the market. When we look at the empirical data, this cannot be the case. Only 15% of fund managers consistently beat the market half the time. Translated, in a given year 85% of the managers are not even getting market returns. The prognosticator always has a creative story to explain “what happened” in the market (hind sight bias).
50 years of academic research has created a very clear scientific picture of how one would invest prudently. It requires implementing three very simple rules:
1) Own equities
2) Diversify globally
3) Rebalance religiously
No one can predict the future of the market. All available information is factored into the current price. Only new and unknowable information or events change pricing. The randomness of the market makes it impossible for any individual or entity to consistently predict market movement and capture additional returns unrelated to risk!
Are your investments getting market returns? Should you know? The answer is a resounding YES! If you’re not sure, I encourage you to get some coaching. These are very simple and coachable items. Request our “Investor Awareness” guide located in free resource section. This guide could be your first step to attaining peace of mind over your investments and retirement. Don’t wonder??? Know!