Ignore the expert’s predictions

Ignore the expert's predictions

Many will get it wrong

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published January 11, 2013 10:20 am AEDT

Looking for a hot tip to boost your portfolio performance in 2013? Here's my tip. Whatever you do, don't pay much attention to news articles or watch TV in which so-called experts give you their forecast for the year ahead.

The reason? Mostly they will be wrong. After all, it's impossible to predict where the market or any stock will end the year. No one really knows what will happen tomorrow, a week or a year from now. Nobody.

In February 2012, Smart Investor magazine used Bloomberg forecasts and analyst recommendations to pick the top 10 stocks that were mostly highly rated by the majority of analysts. Just 3 of those stocks are currently in positive territory. A portfolio of those top 10 would have sent you under water by 19%, and included such gems as Equatorial Resources (ASX: EQX) down 42%, QRxPharma (ASX: QRX) down 44%, Mineral Deposits (ASX: MDL) down 35% and Bandanna Energy (ASX: BND) which fell off a cliff, losing 64%.

Over the same period (Feb 2012 to current), the S&P / ASX 200 (Index: ^AXJO) (ASX: XJO) is up 10.7%. Who would've predicted that back in February last year?

Getting back to the Smart Investor article, there was also a portfolio of the top 10 stocks most disliked by analysts. 4 of them have positive returns currently, and a portfolio of the worst stocks would only have lost you 15% – so much for the top 10 'best' stocks.

In another, perhaps more infamous example, Fortune magazine's August 2000 list of '10 Stocks to Last the Decade', included two stocks that went bust, including Enron and Nortel Networks, and the portfolio lost a whopping 74% over the next 10 years.

Foolish takeaway

Successful investing is simple — but not easy. The difficult part is in finding great companies at attractive prices and keeping your emotions under control. Here at The Motley Fool, we don't make predictions, but do what we've always recommended investors do, and that's finding and buying shares in quality companies at attractive prices.

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Motley Fool writer/analyst Mike King doesn't own shares in any of the companies mentioned. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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