This past week I was invited to the home of an elderly woman to listen to a presentation given by a "Financial Wealth Advisor". The advisor was trying to get the woman to transfer her securities account to the firm of the advisor.
The proposal that was given was to have the elderly woman invest her money as follows; 40% in municipal bonds (fixed income) and 60% in equities (stocks). The advisor held out her 2 hands and motioned while she said "when interest rates move higher, the bonds will move lower in price" and she lowered one outstretched hand. She then said "but as the interest rates move higher, the 60% invested in stocks will move higher" and raised the other outstretched hand higher. So the woman would benefit as an investor regardless of what happens to interest rates.
I asked her how she was so sure that the equity investments move higher in that scenario? She said that all of the experts that she followed or her firm employed assured her that that's what the markets would do because of an improving economy.
My reaction was to think that this advisor was not very sophisticated. She probably was committing a securities violation for promising stock market performance that she could not guarantee.
The simple fact is no one on earth can say with certainty what the markets are going to do in the future. There are some very smart people who project what they "think" will happen and some of them are right more than they are wrong. But NO ONE knows for sure what markets will do in the future, even the professionals. If you are promised that the stock market will rise with certainty by someone, why not ask them why they don't just make themselves rich by just investing their own money?
I excused myself from the meeting and wished everyone the best of luck. I couldn't help but think of how many times in my life I had lost money because the markets did the opposite of what I thought they would do. Wouldn't it be great if you knew for certain what the markets were going to do? Great, yes, but unfortunately, impossible.