Dallas Financial Advisor – Market Timing

Planning for retirement requires a certain amount of foresight, but it’s never as easy as it sounds.  I’m looking at a Reuters article with the following laughable headline: “Quiet Atlantic Hurricane Season a Boon for Insurers”.  I don’t know what to do with this – it sounds to me like the writer is upset at insurers for having the audacity to make money because there were relatively few natural disasters.  Would he have been happier if more destructive storms had held the insurers profits to a lower percentage?  Sometimes I just have to shake my head.

Here’s why I wanted to take a break from helping clients’ planning for retirement to comment on this.  2005 brought hurricane Katrina to Louisiana.  We were told that Katrina was to be the first of a new breed of global-warming-powered hurricanes that would only continue to get worse year after year.  But in the following years, the prediction totally fell apart.  Hurricane activity has now gotten decidedly milder year after year.

Now, I’m not trying to get political here – my game is helping people with planning for retirement, not politics.  My point is about the perils of making predictions.  Weather prediction isn’t all that hard – certain kinds of weather patterns are absolutely predictable.  Summers are hot, winters are cold.  You can predict it.  We know certain things.  But if you look only a little deeper than that level, there are all sorts of complex factors working together to create weather patterns, and the impact of those low-level factors can be devilishly difficult to predict.  Scientists are now saying that El Niño was the cause of the low levels of hurricane activity.  That may be – I’m nobody’s meteorologist, but note how easy it is to look in hindsight and explain why a prediction was wrong.  What’s hard is to actually make a prediction and be right.

Weather prediction, even with all the things we know about weather, still trips up the smartest forecasters, and the same is true of people planning for retirement.  Staggering amounts of computer technology still leaves the experts scratching their heads and creating after-the-fact justifications for why their predictions went awry.  There’s a lesson here I don’t want you to miss.  The financial markets are even less predictable than the weather.  Are you trying to predict the financial weather that’s coming your way?  How much of your portfolio are you going to gamble on your forecast?  Or are you using a financial advisor who has convinced you he alone has unlocked the secret of the financial markets?  Are you about to invest with someone who claims to have a top-secret weather changing machine?

Don’t get fooled as you continue planning for retirement.  Invest with advisors who can guard your portfolio against whatever financial weather is coming.