A study by Elm Wealth found that even finance professionals struggled to profit from knowing future news events. Experts advise against relying on short-term market predictions and instead suggest a long-term, passive investing approach.
An investing firm, Elm Wealth, conducted a study with 118 adults, mostly finance and MBA students, to test the effectiveness of predicting market movements based on past news. Participants were given $50 and allowed to trade the S&P 500 and 30-year Treasurys based on redacted Wall Street Journal headlines from 2008 to 2022, 36 hours before the actual news release. Despite their expertise, around half of the participants lost money, and one in six went broke. The average gain was a meager 3.2%.
While not a perfect scientific experiment, the results highlight the difficulty of consistently predicting short-term market movements even with advanced information. Financial experts emphasize that relying on news to make investment decisions is risky and often futile. They advocate for a long-term, passive investment strategy with a diversified portfolio, minimizing costs and controlling emotions. Trying to time the market based on news is more akin to entertainment than a reliable investment strategy.
INVESTING MARKET PREDICTION LONG TERM INVESTING FINANCIAL EXPERTS PASSIVE INVESTING
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