Economy predictions can be confusing

This January I have noticed a lot of predictions about how the economy and stock market will perform in 2011. This probably happens every January but this year is particularly interesting. Last January, many experts predicted that 2010 would be a relatively bad year for the stock market and economy. The result was actually the opposite as both the economy and stock markets did well.

It seems that the ‘experts’ are a little more humble this year because they realize how wrong they were last January. The result is a mix of predictions. I have heard everything from an awful to great 2011 from these experts which can be very confusing for investors that look to them for guidance. Some say that the bad outlook they gave last year has not disappeared, just delayed until this year. This can either be true or it can be a way of saving face and dignity for the person that was wrong last year.

To help overcome the confusion from these experts, investors both large and small need to rely less on them and more on themselves. This means never substituting expert advice for homework. Even when the advice comes from someone you trust a great deal, doing your own homework on a particular company or investment is always more important. Advice from someone that has steered you right in the past is useful, but only as a part of the decision making process and not the main part.

‘Tips’ from people can be good too, but they are tough to confirm or prove for the average person. The best you can do with that is consider the source and ask as many questions as possible. Then, go back and do your homework on the company in question and look for inconsistencies between what you’ve been told and what you learn through research. This combination should help you cut through the nonsense predictions and ‘tips’ from people you know. It is fun to take advantage of a ‘tip’ and by combining it with your own research, it increases your chance of success with that investment.