Just How Accurate Are Forecasts Anyway?

As this month’s edition was written on Groundhog Day, both Punxsutawney Phil (say that three times fast) and Buckeye Chuck saw their shadows, hence forecasting six more weeks of winter. But how accurate is that forecast? Since 1969 Phil has had a 36% accuracy rate and since 1979 Chuck has had a 47% accuracy rate on early springs only, candidly acknowledging that the definition of “early spring” is subjective and debatable. Even professional meteorologists admit that long-term forecasts are foggy at best. Nice pun! Let’s look at recent consensus forecasts that went awry. General consensus was that:

  • Brexit wouldn’t pass. It did.
  • Donald Trump wouldn’t be elected President. He was.
  • The stock market would go down if Trump was elected. It went up.
  • The Chicago Cubs couldn’t win the World Series. They did.
  • Bruce Berno would become a Masters Swimming Champion. Who said that?!

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Successful investing is the result of discipline, not forecasting.

Successful investing is contrarian. You have to avoid following the crowd, and you have to be willing to ignore your short-term emotions and gut feelings.

Successful investing is a steady, methodical process. The more changes one makes, the more chances one has of being wrong.

Successful investing is humbling.

Successful investing is boring. But fun!

Congratulations!

Please join me in congratulating Kim Masco on successfully earning her Registered ParaplannerSM designation granted by the College for Financial Planning. The RP® course of study encompasses the process and five disciplines of financial planning, terminology and general concepts. Well done, Kim!

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