One of the greatest popular myths about investing in stocks is that in order to be successful, you must be able to predict the stock market’s movements.
Why do people assume this?
For some, it is because they do not understand that stocks give a positive and substantial return over time – they falsely assume that stocks bounce around in the same range forever, and they therefore conclude they must predict movements in order to be able to sell at the top of the range and buy at the bottom of the range.
For others, the desire to predict is born out of human nature, which puts a premium on certainty.
We love to know what will happen in advance!
Hence, it is usually assumed by the beginning investor that to be successful, one must first become an expert at forecasting future market trends.
Experienced investors know, in fact, that nothing could be further from the truth.
Where will the market head for?
Everybody is entitled to his own prediction! My predictions, yours, and your pet’s …
All have the same chance of coming true!
On the other hand, I’m going to let you into a “well known” but “well kept” little secret!
If I definitely knew what the market was going to do next day, week, month or even next year …
I wouldn’t share it with you!
I would place everything I own into options and then … fly away! You would never hear from me again! I wouldn’t even finish my book!
I would be history …
A well remembered one — I hope!
The best way to make money in the stock market is to avoid approaches that rely on market predictions!
This will most likely seem an odd or even an absurd statement to some, perhaps most. Yet, any serious review of the results of market gurus over a long period of time will reveal a track record that is no better (usually worse than) than a simple buy-and-hold strategy.
Don’t misunderstand me …
There is no doubt that if a person could accurately predict the fluctuations of the stock market, that person could far exceed the return of someone who simply bought some stocks and sat on them.
However, the one fatal problem with this is that there has never been a single person who has ever managed to figure out how to do it!