Don't Let 2014 Predictions Turn Into Conviction

NEW YORK ( FMD Capital Management) -- This time of year is chock full of predictions designed to guide your investment decisions in 2014. There are forecasts for top performing stocks, the direction of interest rates, fiscal policy timing, commodity estimates, and many more. For every bull there is usually an equal and opposite bear that claims to be an expert on these topics. This bifurcation can lead to a confusing stream of conflicting messages that hinder your decision making process.

At the end of the day, forecasts are really just educated guesses based on past experiences or data that shape our future outlook. When you place too much confidence in these predictions, it can lead to steadfast conviction. That is when things turn dangerous for your wealth.

Conviction is probably one of the single biggest performance killers in the history of investing. Bill Ackman found that out the hard way this year when he shorted Herbalife (HLF) with a significant sum of money and refused to capitulate. There are numerous other examples of investors that refused to adapt to the market's reality and paid the price for this stubborn behavior.

In a year when the SPDR S&P 500 ETF (SPY) has returned 28%, many investors are probably thinking to themselves that this 4-year bull market is ripe for a pullback. Some might even suggest that we are overdue for a new bear market cycle. While that may be the case, there is nothing at this point to suggest that we are going to see an immediate change in direction. Even a modest pullback in December would likely be healthy to start 2014 at a more attractive level.

If you liked this article you might like

Market Is on the Straight and (Very) Narrow

Look Back to Go Forward

Stock Observations; Reviewing Equities: Doug Kass' Views

Even North Korea's Kim Jong Un Can't Stop This Epic S&P 500 Stock Rally

Robots Might Be Biggest Obstacle for Stock Market Bears