Nobody is a Stock Market Expert

So called Stock Market experts called themselves busy bodies, who used to predict the future course of markets when it was on a song, are nowhere to be seen these days. The most profound advice they give to their customers these days is to sit on cash and wait for an “appropriate” time to enter the market. How profound indeed. The market turmoil is a great lesson in many ways. It magnifies our mistakes and presents us a chance to rectify them. And the experts are only one of the mistakes people commit on a bull run.

Next time when you hear a so-called expert predicting the future course of the market, take it with a bagful of salt. Nobody can predict the market. We all can try to predict the market, after considering a host of factors such as the health of general economy, corporate earnings, and so on. Those with more experience in the market may have an extra edge. But that is where it stops. Nobody can predict the future of the stock market accurately all the time.

This is what a senior fund manager with 20 year’s experience had to say “If these people are so good at predictions, why don’t they do it when the markets are down”. That is when most people are anxious to know what will happen next. In fact, the whole business people asking how much they can earn in three months and these wise men answering is really amusing.

All of them would talk about how they identified a company 10 years ago and made tons of money in the bull market, says certified financial planner. But they never lose money in the market. How is that possible? Investors shouldn’t be that gullible to buy that claim.

Imagine, the market has fallen by around 44% in the last one year. There wouldn’t be a single soul in the market who wouldn’t have seen his portfolio taking a hit. They would argue that they sold their holdings well before the market fell.

The experts mostly con people into buying wrong products. Most people are not inclined to get the details of the product before buying it, and the experts usually exploit this shortcoming. A government employee, bought a unit linked insurance plan last year and he didn’t know much about insurance products. He bought a ULIP plan when his advisor suggested that it would give better returns. Now with the market in the dumps the employee is worried as hell. In fact, she should be as ULIP deducts a large percentage from the first year premium. And now with the investment also taking a hit, she would be lucky if she has 25% of the premium in the portfolio.

According to financial advisors, most people take these soothsayers seriously because they impress them with their past performance. Of course, these are not A-list oracles, but those who run investment services in the street corner. They always have pamphlets which speak about schemes with 100% returns. They will tell their clients that they will get the same kind of returns in the next year. Most people fall for it. They overlook the fact that the past performance doesn’t guaranty similar performance in the future.

A person barely two years old in the stock market like any toddler, he also fell. The only difference is that he will take a while before walking again. According to him, he really lost all his money and has no hope of getting it back. How come? His advisor has been asking him to put more money into the market and he followed his advice. He liquidated all his fixed deposits, withdrew money from the provident fund account and put everything in the market. And it seems he hasn’t even invested it properly. His investments are down by 70%, as against the market downslide of 44% in the last one year. His mistake: he forgot to keep the balance between equity and debt investments.