Bold, confident and wrong … on forecasting and expertise

We wrote a full chapter on forecasting and expertise. It is human tendency to seek the knowledge of the future. It is good to know what can happen, but trying to find out exactly what would happen and exactly when is nothing short of day-dreaming.

Read the following article:

Bold, Confident and WRONG: Why You Should Ignore Expert Forecasts

In the context of investing, this is the biggest game being played – prediction of the market values. It is amazing how the game continues for so long in spite of the poor record of the forecasters.

It proves the popular saying wrong – “You can fool all of the people some of the time and some of the people all of the time, but you cannot fool all of the people all of the time.” Somehow the forecasters in the markets have been able to continue the game for so long. It is amazing that the tendency to know and profit from future is so strong that we ignore the track record of the forecasters.

So what do you do if you don’t know the future? Peter Bernstein’s line in the referred article says it all.

“That’s what diversification is for. It’s an explicit recognition of ignorance.” – Peter Bernstein

That’s it. Just stay diversified. It’s the best defence available for those who understand that they are ignorant.

#RidingTheRollerCoaster – 160

 

 

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