This page is quite old hence its rather spartan appearance.
Why not check out our Latest Stories page for our newest articles or search our site for anything.
COMMENT
By
"There are two kinds of forecasters: those who don't know, and those who don't know they don't know." J. K. Galbraith. Around this time of the year, stock market pundits will be asked how they think the FTSE will finish at the end of 2005. Invariably they will try to talk knowledgeably about their predictions, because that is what they are paid to do – talk. In reality, though, none will have a clue as to how the FTSE will finish on 30 December 2005. What we do know, however, is that there will be no trading on 31 December 2005 because the last day of the year will fall on a Saturday! It would be nice, though, if we could look up what the next twelve months will bring in the same way that we look up dates on a calendar. But that is never going to happen. That said if you fancy predicting next year's FTSE year-end close yourself, here is something that you can try at home. Just take this year's FTSE year-end close and add on 10%, because that this is roughly the long-term growth rate of the stock market. However, it is worth noting that the stock market normally moves within a 20% range in a year. Occasionally, it can move even more, so don't put too much store in your predictions but simply treat it as a bit of harmless fun. In my opinion, assigning too much importance to year-end predictions can be dangerous. And some people may even base their investment decisions upon those guesses. For example, what should you do if those year-end forecasts were to come true in the middle of the year? Should you immediately liquidate your portfolio and call time on your investments until the following year? As far as the long-term investor is concerned, predicting the year-end FTSE close is irrelevant. There will be some years when shares may perform well and other times when they could fall below the long-term average. However, over the long haul you should expect to achieve a rate of return that is better than cash. So it makes sense to ignore short-term predictions, but as a final thought from economist Edgar Fiedler, "If you have to forecast, forecast often."