The certainty of our uncertain future

On the Money


Whether after the opening kickoff or the opening bell, prognosticators had a rough ride in 2015. More than five months ago, ESPN analysts attempted to predict the outcome of Super Bowl 50. Of 48 analysts surveyed, zero picked the Super Bowl champion. Perhaps more interestingly, 36 of the 48 (75 percent) picked a team to play in the Super Bowl that missed the playoffs entirely!

2015 was equally rough for predictions in the financial markets. A 2014 CNN Money survey of investing pros predicted the S&P 500 would end 2015 at 2,184. It closed at 2,044, approximately 6 percent less than the target. Meanwhile, strategists predicted crude oil would rebound to $74, but oil prices ended 2015 near $37. As famed physicist Niels Bohr said, “Prediction is very difficult, especially about the future.”

Much like last year, 2016 faces its share of uncertainty. China’s economic growth and depressed oil prices are confounding the market, and the presidential election looms on the horizon. Unfortunately, two equally intelligent, experienced professionals can analyze these events and arrive at completely opposite conclusions. Even if they do agree, they still have to determine how the financial markets will digest this information. And then, to top it off, they need to consistently repeat this success.

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As investors, perhaps our investment plans should embrace this uncertainty and avoid short-term speculation altogether. The first step to building an appropriate investment plan is to determine your goals. Are you investing for 12 months or 12 years? The next step is to align your investments with your goals using a cost-sensitive, diversified portfolio. Allocate relatively stable assets for your short-term needs (12 months) and relatively volatile assets, like stocks, for your long-term goals (12 years). The last step is to implement a disciplined process for reviewing and changing your plan based on your personal situation, not short-term predictions.

The future will bring more uncertainty…and more predictions. But your future should be based on a disciplined plan centered on your goals, not on the whims of prognostication.

-Justin Moilanen is a fee-only financial planner with Financial Service Group in Mount Pleasant.

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