Conor McGregor, the recently crowned UFC Featherweight champion has taken the world by storm after his 13 second knockout of Jose Aldo who had successfully defended his belt for years and seemed unbeatable. The uber confident McGregor from Ireland is notorious for having his pre fight predictions outside of the ring coming true inside the ring.
Blaring over the P.A. system after he yet again knocked out one of his opponents exactly how and when he said he would, McGregor famously shouted in his Dublin accent: “They call me Mystic Mac because I predict these things!”
Love him or hate him, he has legions of followers around the world who believe that Mystic Mac has that special power.
Most people think that they need to find their own Mystic Mac in their investment advisor. Someone who will “predict these things”, and make changes in their portfolio based on these predictions. You can find your own Mystic Mac, but realize that he or she will be gambling with your money as opposed to investing. When people gamble, sometimes they make money, sometimes they lose everything. When people have “nest eggs” that they cannot afford to lose, this is a very risky proposition and you are better off investing according to principles that over time have always, not sometimes, rewarded investors.
A recent article in the Wall Street Journal, For Stock Forecasters, 2015 Was a Hard Year to Get Right, sums up the tough times that these Mystic Mac’s had this year.
Here are some of the pearls from the article:
> “Oil prices were supposed to fall—but not by this much.”
> “Low energy prices were supposed to be a windfall for U.S. consumers and the companies that sell to them—but consumers didn’t spend as investors expected.”
> The Federal Reserve was supposed to raise rates and lift the fortunes of bank shares—but the Fed didn’t act until the end of the year, and financial stocks languished.
> “A stronger U.S. consumer should provide a lift to the equity market,” wrote Dubravko Lakos-Bujas, head of U.S. equity strategy at J.P. Morgan Chase & Co., (the forecasts didn’t work out as planned).
> “My one-year number will look terrible,” Mr. Freeman, who runs the $13.4 billion ClearBridge Aggressive Growth Fund with co-manager Evan Bauman.
Too many investors are betting their money on mystics who are betting on forecasts that we know probably won’t come true. Why? It’s psychology, human behavior, and the desire to feel like you can control things out of your control. It’s also about selling, marketing, and making money off of the wishful dreams of investors.
Equally as important, even if a particular prediction does hold true, you must predict how and when the the markets will react to the prediction in order to take advantage, and do so in such a manner that the administrative and tax costs of implementing your particular strategy don’t exceed the benefits.
It’s a daunting proposition year after year for decades to come. Unfortunately, too many will let their emotional desire for a Mystic Mac in their life trump the obvious.
This headline has been repeated every year in the past and will be repeated every year in the future. Hopefully you can find advice that embraces the effectiveness of enhanced indexing like those created by Dimensional Fund Advisors. Over the long run, they will knockout the Mystic Macs of the world.
On a final fight note, I personally love the character that McGregor is and realize there is more to his persona when he reveals that he has embraced the book “The Secret” which based on the law of attraction and positive thinking. He’s a true student of movement and the fighting arts and a savvy businessman as well. Hopefully, with his newfound success, he’ll find a competent financial advisor who will keep Mystic Mac in the ring and out of his investment portfolio.
Feel free to schedule an appointment with me to start your financial plan today.
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