Wednesday, November 9, 2016

Should you take market predictions seriously?

In last 12 hours two big nations of the world had seen surprise turn of events!

Within couple of hours of the announcement by our dear PM Modi, 85% Indian currency lost its value and was declared illegal. And the various reactions over social media tells that No one, absolutely No one, including banks, government offices, politicians and media houses had any clue about it. The experts who are generally believed to be able to forecast any big changes in the economic, political and social environment of the country, are keeping silent. Suddenly market predictions have swung from one direction to other.

For example, real estate prices were predicted to rise in later part of the year 2016 and starting 2017 by a major daily newspaper. As per them the prediction was based on data and opinions by experienced experts. Now after the ban on high value currency notes which were supposedly main constituent of black money, the prediction is just the opposite!

It is an open secret that in in India, real estate market is majorly funded by unaccounted for cash. After the money hoarded cash has become useless for any transaction including real estate. Now the prediction is that real estate prices will crash because there will be lesser demand. Of course same experts will predict differently now.

Similarly, In United States of America, till the morning mostly media houses were predicting 80% chance of Ms. Hillary Clinton to be the next president of their country. But we all know what happened. With in next couple of hours wave turned and in a surprising turn of events, Mr. Donald Trump became 45th president of USA. Over 50 newspaper were endorsing Ms. Clinton till last week. Looking at the face of experts throughout the poll analysis today, we can clearly say that no one saw this coming.

There have been many such events in the past where predictions have gone wrong…and it keeps on happening. It happens because despite whatever data crunching we do, there can be surprise events to shake the very basis of the prediction. Like who knew rs. 500 and rs. 1000 note which we were using till yesterday will be a mere piece of paper from today.

Hence let us ask ourselves…If we should take the market predictions seriously?

Instead of asking ‘should I buy gold because gold prices will go down’? or ‘Should I sell my property because real estate market will crash’? Ask ‘Should I buy gold because I want it as part of my asset allocation’ or say ‘I want to sell my property because I need money’.

Now that Mr. Trump is going to be the president, there is a lot of apprehension about forthcoming immigration policies and H1B visas. Amid all this confusion, experts will again start their predictions. But no one knows for sure as to what the future has in store. So instead of listening to random advice from various sources, focus should be on strengthening your position at your work place. Focus on what your visa paper says. Uncertainty, anyways is part of the jobs in the private sector and looking for alternatives should be done regularly.

First and foremost define your needs, set the timelines and then react.

React when you are ready!

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