When and How to Use Market Forecasts

Oberhofer, George
October 2002
Journal of Financial Planning;Oct2002, Vol. 15 Issue 10, p108
Academic Journal
We make these recommendations: • Use the first, generally descriptive, type of forecast (based on an extrapolation of market behavior over long periods of history) to make strategic asset allocation decisions for clients. We recommend that financial planners advise clients to remain committed over time to their strategic asset allocation. Tactical bets away from this strategic asset allocation should be well-diversified. • Avoid making tactical bets on behalf of clients on consensus or survey forecasts. • Invest only a relatively small portion of a client's portfolio based on general market forecasts by individual analysts you believe have exceptional forecasting skill. • If clients delegate investment management to outside managers, check their portfolios first. Bets on market forecasts may already be present in externally managed portfolios.


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