Following on from my note earlier in the month here’s another detailed infographic on the problem of trying to predict returns or thinking it’s better to wait and choose the right time to make your investments. Although this example refers to the US Stock Market (the largest by size in the world) it can apply to many investment choices and indeed could be related to other aspects of life when it comes to predictions!

The S&P 500 Index rose by 23.3% in 2024. This far exceeded expectations from analysts polled at the end of 2023, none of whom believed the S&P would grow by its historical average rate of return,12.3%. In fact, nearly half of the analysts predicted a negative year for the index. If someone listened to those analysts they may have waited and not invested or divested from US stocks and lost out on the returns.

This dispersion in predictions highlights the challenge with making asset allocation decisions based on forecasts. Individuals arrive at different expectations because they may see the world differently. Hence we prefer to look at the evidence of returns over longer periods and consider spreading investments across a range of assets focusing on what you can control to meet your planning goals which is where we can help.