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It’s not just newbies to investing, but also experienced consumers of personal finance, who want to find out the secret method that wealthy people are using, to know where the market will be tomorrow. The media too is awash with investment experts who are ready to tell you that they always knew it. In an international conference I attended in 2005, a strategic advisor to the White House told us “Even my dog knows that the price of oil will only go up from here” when crude was close to $100 per barrel, probably just months before the world saw the crash of oil prices to a point its price practically touched zero. I am very sorry to break this to you, but it is not possible to predict the stock market. And the reason, although rarely explained, is very very very simple. The purpose of a market, any market, is price determination. A market is the meeting place (physical or virtual) for the demand and supply of any product or service, to ARRIVE AT A PRICE. If we could predict the price, by any mechanism whatsoever, there would be no use left for the market. The market would, theoretically and practically, stop existing. In simple words, markets exist ONLY because prices cannot be predicted. The great illusion of media, which shares with us larger than life stories of success, do tell us how someone predicted the rise of a stock. But if they would, at the same time, tell us how many failed, it would be easier for the audience to see the difference between ‘ability’ and ‘chance’. Yet, we do not need to let the indeterministic nature of the stock market, impact the accomplishment of our personal life goals.
August 1, 2021 |
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Right Returns |