No Financial Planning Software or Calculator Can Predict the Future
No financial planning software and no investment growth calculator can predict the future
The future is simply not predictable, even with automated financial planning software.
A previous financial article, “The Solution – ONLY follow financial strategies that are scientific, passive, diversified, savings focused, risk controlled, low cost, and tax efficient,” suggested that investors are much better off with a well-considered financial plan. A stable set of financial beliefs can help you to keep focused and on track throughout your life.
The future is fundamentally unpredictable. The future of personal financial planning and investing is similarly unpredictable. Anyone claiming or implying that they can predict what will happen to investment returns in the securities markets in the future is just blowing smoke. If their predictive smoke claims to benefit you, then you should be suspicious.
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If you have to pay a lot of money to buy their predictions or financial advisor services, then you should be far more suspicious. When you have to push a lot of money across the table to pay some supposed seer, then that oracle is likely to win in the transaction, while you are likely to lose. (In itself, this is a probability-based prediction on our part. However, our prediction relies on one of the most consistent findings from the financial science literature, which is “the more you pay to play, the less you will keep from the investment securities markets.” (See our articles in these categories: Scientific Investing and Controlling Investment Costs)
Similarly, anyone who claims that he or she can assess probabilities about what will happen financially in the future is over-reaching at best. While probability assessments about the future may seem reassuring, they are just another method of blowing smoke. Because most individual investors are risk adverse, they naturally seek reassurances about their futures and their personal financial planning. Many are all too willing to listen to and pay dearly for seemingly authoritative pronouncements about probabilities related to the future. If someone tells you that his financial planning calculator method or investment growth calculator prediction has a certain probability associated with it, be very careful to understand the assumptions and methods used to develop this probability statement. The higher the prices of financial advisors’ services, the more questions you should ask.
Securities market prices reflect the collective efforts of all professional and individual investors to peer into the future. Historically, securities markets have paid risk premiums to investors only to bear market risks. Investment risk does not decline with the passage of time. It is always there. With investing, there can be no assurances, unfortunately. (See our articles in these three categories: Securities Valuation, Luck versus Skill, and Returns and Risk Premiums)
Too often, financial services companies give individuals advice about financial planning and investing that includes some razzle-dazzle about their supposedly superior analytic model, system, or tool. The general theme is usually the same: pay us and we will help you to beat the market using our unique insight developed from our special tool, model, system, etc. Unfortunately, these marvels are just more sophisticated forms of blowing marketing and sales smoke — this time aided by technological mirrors.
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Tags: investment securities
Personal Financial Planning
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