Sometimes, it can seem like some people really have a gift. They know when things are going to happen. They have premonitions to see into the future. Persuading others that they are able to anticipate the coming events, they are able to charge hefty prices for their services. So, they end up exploiting the people who would be willing to pay anything to know what’s in store for them. But do these fortune tellers really know what’s going to happen, or are they just pulling the wool over our eyes?
When I say “fortune tellers,” I’m not talking about “fortune tellers” in the classical sense. I’m not talking about psychics—no, I mean something more literal. I’m talking about “financial advisors.” I’m talking about the people who can lead you to believe that they know what’s going to happen in your financial future. They know how the market is going to go and, consequently, how your portfolio is going to perform in relation to it. They can be so persuasive, can’t they? But, in the end, do they really know what’s going to happen? Or, are they just really good salespeople?
Suppose you watched a video on the Internet of someone accurately predicting the result of a coin toss ten times in a row. What would you think of that person’s ability to predict the future? Were they just lucky, or do they really have a gift? Now, suppose that the coin is fair and the video hasn’t been edited. Can you think of any way they could have predicted the outcome without having some magical sense of future events?
Well, try the exercise yourself. See if you can flip a coin and get heads ten times in a row. Each time, you have a fifty percent chance of getting heads. But, it is possible to get lucky enough to land a heads a few times in a row. If you get tails, simply start over and keep flipping until you’ve gotten a heads ten times in a row. Now, suppose that you set up a video camera and recorded the outcome of each of your trials. You don’t have to edit any of the videos. Instead, once you’ve finally flipped heads ten times in a row, you simply keep that video and get rid of the rest.
Now, think about the investing advice you might receive from financial gurus. Suppose they show you an example or two of market movements that they predicted with remarkable accuracy. You may be attempted to believe that they actually have some special knowledge of the future. After all, they’ve given you evidence, haven’t they? But, when you’re tempted to believe these folks enough to give them your money, stop and think about the coin tosses.
What is the financial advisor not telling you?
The problem with listening to financial pundits because they’ve made a few accurate predictions is that they aren’t telling about all of the things they’ve gotten completely wrong. They are cherry picking their predictions to find the ones that panned out, and then using them to convince you that they’ve got a gift. The truth is that no one can predict the future. If brokerage firms really knew what was going to happen with the market, they would be investing their own money instead of yours. If you need more direction on how to avoid getting sucked in by the charlatans, feel free to reach out to us for a complimentary consultation. There is no sure thing that will help you get rich quick, but we can help you invest your money wisely and cautiously to—over time—bring about the life that you really want for yourself.