Hat tip to Big Picture Blog for this video of a market call made by an “investment expert.” Yes, they do sound convincing, their arguments cogent, their opinions sought after, their track records at forecasting….you be the judge. As you watch the video (1 minute and 18 seconds), jot down the reasons that this market analyst gives for selling stocks.

Ok, now let’s do a little detective work to see how the stock market has performed since this market call on May 10, 2010.  Let’s use the S&P500, an index generally recognized as a broad and diversified indicator of the stock market, for this analysis.  Ask students to find historical prices for SPY (the ticker for an S&P ETF) at Yahoo Finance on May 10, 2010 and compare to today.

Drumroll please….

• May 10, 2010:  SPY (Adjusted closing price which accounts for dividends): $104.91
• May 11, 2015 at 3:42PM ET:  Market price of SPY:  $211.00

For those of you scoring at home, that is a 101% return (or a two bagger in investor parlance) since his “market call” to sell stocks. Tag this posts:  The Hazards of Taking Advice from Market Forecasters.  And he is not alone in his inability to predict the zigs and zags of the market (here and here for more evidence)…so why do you think we, the investing public, listen to them?  Think behavioral finance…

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

More posts by Tim