You’ve probably heard of Robert Kiyosaki, or at the very
least, heard of one of his most famous books “Rich Dad, Poor Dad”. In the book he explains how he learned to
build wealth from his “Rich Dad” and how those ideas differed from his “Poor
Dad”. While some of the lessons are
useful, where it become dangerous is when people start following his
predictions (or anyone’s predictions for that matter) on the stock market.
Here is a recent article reminding us of his
prediction from 2002 (14 years ahead of time!) about the pending crash in
2016. His prediction is based on the idea
the first wave of baby boomers will turn 70.5 this year and be forced to sell
stocks to withdraw their required minimum distributions (RMDs) from their
retirement accounts.
In practice, I know this to be a silly prediction given two
realities; one is that most 70 year olds don’t exclusively own stocks in their
retirement accounts and second is that many of the baby boomers will simply
take their RMD and reinvest the proceeds in their non-retirement accounts.
Despite the logic against his prediction, the point is that
predictions about the stock market are a pointless exercise and, if followed,
are more likely to hurt your portfolio than help. Here is one of his past
predictions that help prove my point:
Prediction on 2/23/10
= the stock market was in a “dead cat bounce” and a decline to 5,000 on the Dow
was likely by the end of the year (the Dow stood at 10,282 on 2/23/10)
Result = the Dow closed
at 11,577 on 12/31/10, up 12.6% from the date of his prediction. To make matters worse, the Dow stands at 17,730
at this moment, up 72% from the date of his prediction.
This is only one example of a high profile “finance expert”
who makes bold predictions. Many of
these predictions are scary and seem to make sense. Unfortunately, the bold statements are simply
for show and mainly serve to increase the publicity of the expert. Stock market predictions shouldn’t be used
to make big changes to your investments, especially for those who are
approaching retirement.
Steven Elwell, CFP®,
March 30, 2015
Learn more about my
services at www.levelFA.com
