It appears to me that in times of great uncertainty, people want me (a financial advisor) to know where the market is heading the most. Certainly, I have my informed opinions, bringing all my education and experiences to bear. But I often find myself having to explain that I can’t see into the future and tell them exactly what the market is going to do, all I can provide is informed guesses, and long-term investment success should not depend on guesses, informed or otherwise.

Today, let’s do a mental exercise: imagine I can actually accurately predict the market. If an ordinary person had $10,000 to invest in the S&P 500 index on 1/1/2000, by the close of the market yesterday his investment would have grown to $45,320. Not too bad!

What if I could predict the market and I could go long or short every month based on my market prediction, with the same $10,000 investment on 1/1/2000. How much do you think I would have grown the money to by now? 

It would be $16mm!

In fact, I could do even better since I could do leverage bets. That is, instead of merely going long or short with the market, I could go 2x long or 2x short with the market. When I did this with the same $10,000 on 1/1/2000, guess how much money I would have by now?

$18+ billion!

Do you think I would still need to work as a financial advisor?

Here is the important takeaway from this exercise: any financial advisor who claims to predict the market is a fraud! If he truly could, he wouldn’t need the job!

So if financial advisors can’t predict the market, how can they add value? I can’t speak for others, but here is what I do: I help my clients make smart decisions based on events that have already happened, not on guesses about the future. 

You might ask: are there smart decisions to be made when the market falls? Yes! It’s an opportunity too good to pass up.

1. It’s a great opportunity to do tax loss harvesting (resulting in over $100k worth of tax savings for some clients.)
2. It’s an opportunity to acquire more productive assets on the cheap. So the assets my clients own are more numerous now!

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