“The biases the media has are much bigger than conservative or liberal. They’re about getting ratings, about making money, about doing stories that are easy to cover.” – Al Franken
And there you have it, folks! Trying to change your portfolio based on who is saying what in financial news is about as useless as regular women trying to implement Gwyneth Paltrow’s diet and exercise program.
In fact, in this article, Jonathan Mackay of Morgan Stanley Wealth Management admits: “This doomsday scenario of significantly higher rates hasn’t happened,” Mr. Mackay said. “What firms got wrong, including us, is the pace of recovery has been slower than expected. Bond yields follow growth.”
How good are the experts in predicting investment winners and losers? Below are recommendations of Wall Street Analysts’ 10 favorite and 10 most unpopular stocks in 2008, 2009, and 2010. The S&P 500 beat the analysts’ 10 favorite stocks in 2 out of 3 years. The analysts’ least favorite stocks beat their favorite stocks 2 out of 3 years.
| Analysts Say “BUY” | Analysts Say “AVOID” | S&P 500 Index | |
| 2010 | Up 24% | Up 32% | Up 13% |
| 2009 | Up 22% | Up 70% | Up 26% |
| 2008 | Down 48% | Down 51% | Down 39% |
Source: “Why You Shouldn’t Trust Wall Street’s Top Stocks for 2011” by Brett Arends, Wall Street Journal, Jan 2, 2011
So, what’s the answer? Blissfully easy. Diversify into different, low-correlated asset classes (i.e. investments that don’t do the same as each other at the same time). Buy low cost investments. Rebalance every year or so. Chill out and watch some football instead of MSNBC.
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