Three Reasons Why Investors Shouldn’t Waste Their Time Forecasting Elections
It’s May 2019 - the ‘much awaited month’ when Indian general election results would be out. It is widely believed that general election outcome will be the most important event impacting investment portfolios. Market participants are busy shuffling between business news and general news as if their own fate is tied with the contesting candidates and Prime Minister aspirants. We believe they are just wasting their time...
While election results will do to the markets whatever they will do, we list below three reasons why election results are simply over-hyped and should not be the primary concern for the long term investors:
1) Forecasting right (but expected) might not help: Rightly forecasting a result that is widely expected and taking investment decision based on that looks like a good strategy but isn’t. This is because the market, in its collective wisdom, might have already discounted the expected right result.
2) Forecasting right (but unexpected) is also not a good idea to bet on: Rightly forecasting a result that is not anticipated definitely should do the trick, right? Alas, it won’t either. Since there is a low probability that what you are forecasting will happen (that is what unexpected means anyway!!), betting on this result is also a clear no no…
3) Forecasting wrong is a disaster anyway: Forecasts are prone to go wrong as well. Taking an investment decision based on a wrong forecast is as dangerous as it gets for your investment portfolio.
So, you may ask, that if forecasting election results is a waste of time, how can one use their time productively to make their investment decisions rather than spending hours and hours watching TV to gauge election trends?
As always, we suggest to utilize your time doing the same stuff that always gives results: focusing on your equity allocation, and on the quality of stocks in the portfolio and being diversified but at the same time not over diversified. And last but not the least, being long-term focused rather than trying to be opportunistic.
Need support to do that? We are a call away to steer your portfolio towards success, whichever government comes to power!!
Happy Investing during May 2019 and beyond...