2019 Predictions: More Harm Than Help

A new year is approaching, which means the financial media’s “Where to Invest Now” guides are landing in inboxes everywhere.

As usual, headlines will read something like “Expert Stock Picks to Buy Today” and “Where to Invest in 2020.”

As we’ve written in the past, these experts’ predictions do a great job of garnering attention and spurring a frenzy of activity.

While others shift their portfolios in response, we encourage you to sit back, relax, and join us for our annual holiday tradition: a stroll down memory lane as we review the results of last year’s prominent predictions.

The Diversified Basket Wins

In an environment of market volatility (an apt description for the last quarter of 2018), stock picking provides an opportunity to “pick up outstanding bargains,” claimed Forbes.

For its “12 Stocks to Buy for 2019,” the magazine turned to editors of top investment newsletters to help readers find those opportunities.

The results? Forbes’ few winning picks were more than offset by losers Japan Airlines (-12%), TPIC Composites (-30%), and B&G Foods (-41%).

The average return of Forbes’ exceptional buys? From recommendation date through December 16, they rose 12%, less than half the U.S. market’s 27% return over the same period.1

That’s right, Forbes’ picks badly trailed a diversified basket of all stocks—no picking required.

U.S. Stock Market Beats Kiplinger’s

“Making money amid an uncertain market,” wrote Kiplinger’s, “will require careful choices.”

To help readers, the publication compiled a list of 19 “buys” and 5 “sells” with help from experts at Charles Schwab, T. Rowe Price, and Morgan Stanley, among others.

The results of Kiplinger’s “buys” ranged widely, from loser Dupont (-40%) to winner Coupa Software (+138%), with a collective average return of 24%.2

While Kiplinger’s “buys” did outperform the U.S. stock market’s 20% return over the same period, their average “sell” recommendation was also up 20%—meaning investors who sold those stocks short lost 20%.

All told, the 24 buy and sell recommendations did make money in 2019 (+16% on average), but together fell four percentage points short of the 20% return of the broad U.S. stock market.

Indexes 3, Fortune 0

To pinpoint companies able to beat the market in 2019, Fortune assembled its annual roundtable of leading investment managers.

“Indexes are piling up with value traps,” warned one of Fortune’s experts, so a more careful selection of stocks would presumably score big in the coming year.

For their all-star list, the experts picked stocks both large and small, value and growth, from around the globe. Admittedly, the variety of their selections made benchmarking the entire list’s 14% return somewhat more difficult.3

But whether compared to the S&P 500 Index (+23%), the Total U.S. Stock Market Index (+18%), or the Total World Stock Market Index (+16%), the final score for Fortune in 2019 was indexes 3, experts 0.

Be Sensible, Not Speculative

The takeaway?

Rather than rely on speculative forecasts fueled by experts in the media, sensible investors harness the long-term returns of the world’s capital markets via diversified and low-cost portfolios.

After all, the annual chorus of expert predictions sure produces a lot of buzz, but much less return.

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1 Russo, Tina. “12 Stocks To Buy for 2019.” Forbes, January 1, 2019.

2 Glassman, James and Kiplinger’s editors. “19 Best Stocks to Buy for 2019 (And 5 to Sell).” Kiplinger, December 7, 2018.

3 Heimer, Matthew. “The Best Investing Advice for 2019 From Fortune’s Experts.” Fortune, November 19, 2018.

 

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