Money Manager Believes Making Market Predictions is Not the Path for Smart Investors

FREDERICKSBURG, Texas, Feb. 16, 2011 /PRNewswire/ -- "I don't make stock market predictions," says Andrea Olsen-Condon, President and Chief Investment Officer, Tanglewood Private Family Office. "It may be entertaining and what the investing public has been conditioned to expect from money managers, but it also can have unintended consequences that may reduce objectivity, agility and, ultimately, long-term portfolio performance.

"Predicting future market events suggests you have, or think you have, a gift of clairvoyance.  As much as anyone may immerse themselves in market-related news and economic data, unexpected game-changing events are lurking constantly, eager to prove the prognosticators wrong.

"But its consequences don't end there.  When a money manager incorporates market predictions into their investment strategy, he/she may feel compelled to stick to that prediction in order to avoid flip-flopping and risk losing investor confidence. Pressure to be 'right' can cloud judgment and possibly cause the manager to remain too loyal to their theory for too long.  And the portfolios suffer accordingly.

"Of course, there are those rare occasions when an analyst or advisor makes the 'big call', like Elaine Garzarelli's accurate prediction of the 1987 stock market crash, Robert Prechter's Elliot Wave predictions of doom, or more recently, Meredith Whitney's correct call on the pending collapse of the U.S. banking sector.  The streets are littered with 'one hit wonders' whose methodologies worked in certain rare times, but have been conspicuously quiet ever since.

"If you are swinging for the fences and want to try to make as much money as possible regardless of risk...then making predictions and investing ahead of a potential big move is the way to do it.  On the other hand, what has served investors well, during good times and bad, has been our reluctance to make market predictions.  Rather, we remain immersed in the ongoing flow of economic and financial news and data and do our best to remain in the present, constantly looking for signs of a sea change.  We don't need to make predictions; we let the market itself be our guide. And, based on our experience, it does a good job," concluded Ms. Olsen-Condon.

SOURCE Tanglewood