At this time of year financial predictions abound. But are they helpful? Is anything that is 25% correct helpful? About 75% of predictions turn out to be wrong, making 25% accurate. But, here’s the the beauty of investing in stocks: If you follow my SUCCESS THROUGH SIMPLICITY approach, you don’t need to be able to make predictions to be successful. I understand this may be a very controversial statement, but I have a 25 year, almost 12% compound annual growth rate (CAGR) record to back it up. I read and study predictions, but largely for the purpose of understanding what is likely to turn out wrong. In my newsletter the first and most confident prediction is always, “Most predictions you read at this time of year will be wrong.” If you read the book, STOCKS for FUN and PROFIT~Adventures of an Amateur Investor, you will see how my predictions turned out vs. the experts and the record is pretty good. However, I don’t use those predictions to dictate investment approach, because I know I don’t hold a crystal ball.
Here are a few irrefutable facts:
- Investing in income producing assets is critical to achieving financial security and building wealth.
- The stock market has an almost century long record of delivering about 10% CAGR.
- Investing in larger, solid, generally dividend paying companies, and sticking with them through good times and bad, will help you achieve returns similar to the market. This is vastly superior to interest bearing investments with current, extremely low interest rates. It is also how you reduce workload managing investments.
It took me a long time to figure out how simple it is.