Carl Richards is a certified financial planner in Park City, Utah. His new book, “The Behavior Gap,” was published earlier this year. His sketches are archived here on the Bucks blog.
Lately, a lot of people have been asking me where I think the stock market is headed. It’s a common question, but it does get more frequent when the Dow is in the news for crossing some barrier, like reaching 13,000.
Why do we look for someone to divine the future for us?
I think we all know that predicting where the market will head is next to impossible. And it’s even more unlikely that we’ll find a guru who will predict it correctly again and again. Yet we still look.
Maybe we’ve always been this way. We look for someone, anyone, who can take the complex and seemingly random landscape we’re trying to navigate and make sense of it.
We do this in many areas of life, seeking shortcuts or mental tricks we can use to find an answer. Think about the weather. The forces that control it can be complex, and despite rather predictable seasonal changes, it can feel random on any given day. So even though the weather forecast is often wrong, we keep checking.
When it comes to money, we look for a guru to answer questions like:
With the Dow back at 13,000, is now a good time to invest?With the Dow back at 13,000, is now a good time to sell?What will happen in Europe?Should I invest in real estate?When are certificate of deposit rates going to improve?I'm reminded of a meeting I had with an investment committee of a sizable endowment fund. The members bemoaned the fact that all they really wanted was for someone to tell them when the market was going down or up so they could know when to get out and when to get in. They said it was fine if it wasn't a perfect system, but surely the "pros" could get close.
Unfortunately, they can't. No one rings a bell when things are about to turn around. Think back to March 2009. Who was predicting a market run like we’ve seen since then?
I’ve also had multiple people tell me that while you can't time the market (how silly!), you can "just tell" when it’s getting close to the top. You can just "feel it." But I don’t recall that working out very well either.
It’s easy to find people willing to tell you where they think things are going. Jim Cramer will tell you where he thinks 40 stocks a day are headed. Alan Greenspan was more than willing to tell us that a “national severe price distortion seems most unlikely in the United States.”
I don’t fault people for being wrong, but I do think we should stop listening unless we’re doing it for fun. You know, like going to the circus.
Another challenge when searching for gurus is that they often seem to be saying different things. What are we supposed to do when we read these two quotes within days of the other?
“We’ve been counseling investors that it’s time to get back in the market." — Douglas Cote, chief market strategist at ING Investment Management.“We think the next pullback could be particularly sharp.” And, “There is very little chart support beneath the market, in our view, so when a drop comes, get your fingers out of the way.” — S&P Capital IQ.So what if we finally stopped looking? Imagine what life would be like if we built a plan that didn't depend on a guru and instead spent time focused on what we do have some control over, like how much we save, our asset allocation and how much we pay in fees.
What if instead of searching for the guru, we read a book or went to a movie? Looking for something that you will never find is no way to spend our most valuable resource: time.
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Carl Richards is a certified financial planner in Park City, Utah. His new book, “The Behavior Gap,” was published earlier this year. His sketches are archived here on the Bucks blog.
Lately, a lot of people have been asking me where I think the stock market is headed. It’s a common question, but it does get more frequent when the Dow is in the news for crossing some barrier, like reaching 13,000.
Why do we look for someone to divine the future for us?
I think we all know that predicting where the market will head is next to impossible. And it’s even more unlikely that we’ll find a guru who will predict it correctly again and again. Yet we still look.
Maybe we’ve always been this way. We look for someone, anyone, who can take the complex and seemingly random landscape we’re trying to navigate and make sense of it.
We do this in many areas of life, seeking shortcuts or mental tricks we can use to find an answer. Think about the weather. The forces that control it can be complex, and despite rather predictable seasonal changes, it can feel random on any given day. So even though the weather forecast is often wrong, we keep checking.
When it comes to money, we look for a guru to answer questions like:
I'm reminded of a meeting I had with an investment committee of a sizable endowment fund. The members bemoaned the fact that all they really wanted was for someone to tell them when the market was going down or up so they could know when to get out and when to get in. They said it was fine if it wasn't a perfect system, but surely the "pros" could get close.
Unfortunately, they can't. No one rings a bell when things are about to turn around. Think back to March 2009. Who was predicting a market run like we’ve seen since then?
I’ve also had multiple people tell me that while you can't time the market (how silly!), you can "just tell" when it’s getting close to the top. You can just "feel it." But I don’t recall that working out very well either.
It’s easy to find people willing to tell you where they think things are going. Jim Cramer will tell you where he thinks 40 stocks a day are headed. Alan Greenspan was more than willing to tell us that a “national severe price distortion seems most unlikely in the United States.”
I don’t fault people for being wrong, but I do think we should stop listening unless we’re doing it for fun. You know, like going to the circus.
Another challenge when searching for gurus is that they often seem to be saying different things. What are we supposed to do when we read these two quotes within days of the other?
So what if we finally stopped looking? Imagine what life would be like if we built a plan that didn't depend on a guru and instead spent time focused on what we do have some control over, like how much we save, our asset allocation and how much we pay in fees.
What if instead of searching for the guru, we read a book or went to a movie? Looking for something that you will never find is no way to spend our most valuable resource: time.
Children often ask tough questions about money. In a series of posts this month the Bucks blog will discuss them one by one. We invite you to answer a few yourself or suggest new ones that your children have asked.
Paul Sullivan writes about the strategies that the wealthy use to manage their money and their overall well-being.
All of us need to take some time every so often to knock things off of our financial to-do list. To help, we've created a series of articles and an interactive checklist to get you started.
Increasing your savings by one more percentage point "“ or even better, another percentage point a year "“ can add up to big additional savings over time.
An interactive tool to estimate the future cost of higher education.
Compare the cost of renting and buying equivalent homes.
See how long it could take for your portfolio to return to its peak value.
March 06
The Obama administration announced a new initiative that would make refinancing less expensive for certain borrowers with mortgages through the Federal Housing Administration.
March 06
Life would be so much easier if people could just tell us where the stock market is headed. But life doesn't work that way.
March 06
Treating preschool cavities with surgery, a manifesto for air travelers, the student debt burden is growing and other consumer-focused news from The New York Times.
March 05
The Barclaycard Ring MasterCard will not only allow its cardholders to influence how the card works, but it will also let them collect a portion of the profits based on its performance.
March 05
A hidden mortgage fee is set to rise, airline apps help smooth travel, printing taxes from the iPad and other consumer-focused news from The New York Times.
Ron Lieber writes the Your Money column, which appears in The Times on Saturdays.
Tara Siegel Bernard is a personal finance reporter for The Times.
Ann Carrns is a freelance reporter based in Fayetteville, Ark.
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