Fintech executive, writer, math geek, and investment systems developer. Founder and CEO of Altruist and Founder of FormulaFolios.

Everyone's Saying the Market is Going [up or down] - and They're Mostly Wrong

Everyone's Saying the Market is Going [up or down] - and They're Mostly Wrong

Every now and again I'll have a client or blog reader comment about how "everyone's saying the market is going... [either up or down] - so shouldn't we be more [either more aggressive or conservative?" My answer is usually the same boring stuff (have a good plan, follow it, don't listen to all the noise, etc), but today I have some valid statistics that show why you should never listen to what "everyone" is saying.

Turns out, all the supposed market gurus...are wrong more often then they are correct.

CXO Advisory Group has been collecting data from market forecasters since 1998.  All told, they've tracked and graded over 6,000 forecasts by many well-known investments sages.  The overall results - are not good.

Over the past 13+ years the average accuracy of the market gurus is a pedestrian 48%.  In other words, less than your odds of flipping a coin.  Or, putting a blind fold on and throwing darts.  Or...well, you probably get the point.

Here's the chart from CXO showing the entire history:

Stock Market Gurus

Stock Market Gurus

Notable Guru Failures

It's easy to pick on gurus when they are wrong.  And since they are wrong more than they are right - it's especially easy.

For example, Jim Cramer (the boisterous host of CNBC's Mad Money) has made 62 market predictions over the past 13 years.  His accuracy rate (on the direction): 46.8%.

Maybe all the yelling and screaming, funny noise board shenanigans, and "booyahs" should just be replaced with a simple coin flip?

Nah, that wouldn't make for good ratings, which would hurt ad sales.

Abby Joseph Cohen, a partner and Chief U.S. Investment Strategist for Goldman Sachs fared even worse.  According to CXO - her accuracy rating is 35%.

Robert Prechter, President of the popular Elliot Wave Theorist Newsletter, takes home last place amongst rated gurus.  Since 2002 (when CXO started monitoring his forecasts), he's been correct just 22% of the time.  Ouch!

If the Gurus are all Wrong, Who Should You Listen to?

CXO monitors the forecasts of 68 well known, successful (i.e., they make a lot of money - not necessarily their followers) investing gurus - and over 60% of them can't even get the direction of the market correct.

As I've pointed out before, when "everyone" is saying something - it is usually wrong.  Which is okay, because if you have a solid, disciplined plan; it really doesn't matter.  Being conservative, balanced, and sticking to a plan works (over time).

Oddly enough, if an investor simply put 1/2 of their money into the Vanguard Total Stock Market Index Fund, and the other 1/2 into the Vanguard Total Bond Market Index Fund; they'd have been correct in 10 of the past 13 years.  Beating every single "guru" monitored by CXO over the same time period.  Nothing fancy, no need for reading magazines or watching TV, just plain and simple.

[LEGAL DISCLOSURE] I'm not advocating that mix.  Just pointing out that all of us can be better than a "guru" if we just stick to a simple plan.

Only problem is, we'd have a tough time getting our own TV show!


Jason Wenk

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