Buzz
Statistics are everywhere, especially when it comes to investing. Financial writers and experts often seize on tiny details from the markets, claiming they reveal something monumental about the economy's condition. And once you know these details, you're supposedly armed with an advantage in investing. (If you’ve been following these analyses, you've seen countless predictions of an impending recession, but here we are.) Market data can even be measured to the exact second.
However, no statistic will provide you with a consistent edge in beating the market. There are too many variables, and no one can truly predict the market’s future movements. As Michael Batnick points out in his post on the Irrelevant Investor, Jack Bogle wrote in his book *Enough*:
Numbers are not reality. At best, they merely reflect a dim version of it. At worst, they distort the very truths we aim to measure.
There’s so much information out there that you could easily spend all your time analyzing stats to try to ‘optimize’ your investments. As Batnick writes, people are drawn to this because it creates the illusion that the future will simply mirror the past. But trying to predict the market—or life—is a futile endeavor.
This isn't to say you shouldn't get to know the market's fluctuations (after all, this is why we suggest investing in low-cost mutual funds)—but there's no need to immerse yourself in unnecessary statistics that won’t influence the future. *Writes* Ben Carlson, director of Institutional Asset Management at *Ritholtz Wealth Management*:
Understanding market history can be valuable in many ways:
It prepares you for a broad range of possible outcomes.
It demonstrates how human nature can drive things to extremes.
It enables you to think about the future probabilistically, using current conditions as a guide.
It helps set realistic expectations.
It shows that almost everything in the markets follows a cyclical pattern.
However, studying market history does not:
Give you a glimpse into the future.
Reveal how investors will behave in specific situations.
Help you avoid falling into the trap of overconfidence.
Account for the fact that markets are in a constant state of change.
Teach you how to navigate unprecedented situations.
Provide you with a definitive guide to future market performance.
Being an informed investor is crucial, but no statistic can predict what the market will do next. Accept the uncertainty that comes with it.
