To Forecast or Not to Forecast? That’s the Question
Top 5 of the Week of January 16
In our Top 5 this week, we look at the various expert stances you can take for viewing the new year. Jeff Miller from a Dash of Insight questions whether forecasting is always foolish? But Barry Ritholtz, writing for The Washington Post warns us of the danger of getting involved in the January predictions for 2017. And Josh Rodriguez of Modest Money believes the market could swing either way at the moment.
A Wealth of Common Sense’s Ben Carlson looks at 2017 and asks his significant questions for the year ahead. And we close with Part 2 of Early Retirement Now’s multiple part guide to safe withdrawal rates—and what this year’s rates mean for the FIRE community…
Which Is the Best Forecasting Model for Success?
- Be open-minded to the different approaches to successful investing, many people may find a profitable path where others will find nothing
- Consider predictions that are risk-based or probability-based; it’s difficult to pick great stocks and sectors, these are the two forecast types that offer value
- Many investors declaim the use of forecasts and models, but there is a place for them if they’re the exception to the rule as above
Avoid January’s Stock Market Guessing Game
- It’s common at this time of each year to attempt to predict how the stock market will play out in the coming year
- Alternatively, look at the possible trends which may affect your portfolios, the economy and global markets, then look to their historical precedent to determine what to do
- This is true of politics (the President has no personal influence on the rise or fall of stocks), selling everything (this has rarely been a good move in any January before), and valuations (the key will always be diversification)
Bearish or Bullish Times Ahead?
- In the global stock market, 2016 saw us open with decline, improve greatly in the middle, before finishing on a firm position
- Bullish views argue that in 2017: Trump will have a good influence on the market, oil will advance in gains, and that recent positive global economic conditions will reflect well too
- The bearish stance is that Trump will trigger decline, oil won’t recover but will plummet, the global economic situation is short term only, and that 2017 will bring economic hardship instead
Believe we’re headed for a bull market? Or are you taking a bearish stance? Let’s start a discussion in the comments section below
A Few Questions for 2017
- Will Trump as President manage to alarm the market? Maybe yes, maybe no—his behavior is too unpredictable to guess
- Will emerging market stocks shine? After lengthy underperformance, 2017 could perhaps be the cyclical year for emerging markets
- Are we due for another Ponzi scheme, fraud or fund blow up? Long low-interest rates and above normal stock valuations have set the stage for some panicked event possibly
- There are too many maybes, perhaps, and possibilities for anything to be certain in 2017
3.5% May Be The “New 4%” for Early Retirees with 40-60 Year Horizons
- Capital Preservation (CP) seeks to hold an even inflation-adjusted value by using dividends, etc., while Capital Depletion (CD), aims for a zero (or plus) final portfolio value by using gains and principal
- The upside of CP is the low shortfall risk of losing money on your investments, the downside of CP is less long-term protection against inflation
- CD allows you to withdraw more than CP, but failure rates increase with longer retirement horizon times, adjust by 0.50% cut for a longer success rate
Top 5 of the Week is a summarized collection of financial investment articles that we like and think you might like too. Having written thousands of pages of equity strategy and company research between us, we understand the allure of the ever-changing world of finance. Investing is an art form—and like everything, something you can work on and improve at. There are some excellent writers out there on the finance web, some offer a running commentary on today’s market, some are doing research, some have tips on how to Become a Better Investor, and some just lift the cloud of fog behind a lot of financial jargon. Each week we will keep you up to date with the top 5 articles worthy of your attention.
Anything you would like to discuss about this week’s top 5? Do you have another favorite that isn’t mentioned here? Feel free to add it below. Let’s start a discussion in the comments section!
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DISCLAIMER: This content is for information purposes only. It is not intended to be investment advice. Readers should not consider statements made by the author(s) as formal recommendations and should consult their financial advisor before making any investment decisions. While the information provided is believed to be accurate, it may include errors or inaccuracies. The author(s) cannot be held liable for any actions taken as a result of reading this article. The Become a Better Investor Team doesn’t necessarily endorse any stocks or shares mentioned in the articles or the author of such articles linked to and summarized in Top 5 of the Week and cannot guarantee the accuracy of its information.