LeBron James and Stock Market Predictions - 2025

 

It's the beginning of a New Year!

With the beginning of each new year brings investment companies and their projections for what to expect in the year ahead.  Just like you probably do, we enjoy getting their perspectives for 2025.  However, when you look historically at how accurate they are, you may be disappointed.  

It's our belief that the way to succeed in the stock market is to build a thoughtfully-constructed portfolio, have a robust investment philosophy, and stick to that strategy over a long-term time frame.  We attempt to do this in a low-cost, tax-efficient way, and we believe that is how investors "win" in the markets.  

If you have questions, please don't hesitate to reach out.  Have a great week!

 

Video Transcript...

Happy New Year! I don't know if you make New Year's resolutions, but one of mine is to make more videos this year. So I look forward to seeing you. If there's any questions you have or if getting your financial house in order for 2025 is one of your goals, feel free to reach out. We're here to help.

Starting with the idea of projections, because it's the beginning of the year, you'll hear a lot about projections from different companies. And I was looking at a study that looked at people's projections. It took 20 different companies, in particular, looked at their projections for last year, 2024, and figured out how accurate or inaccurate they were.

So if you look at those projections, the range of them was anything from a -12% return to a positive 13% return. In the end, the markets currently, as of December 31st, the S&P 500 is up over 23%. So well above even the highest projection. Just goes to show projections don't mean that much.

One final note about projections is if you're looking at a one-year timeframe, that's a short-term timeframe. Short-term timeframes are very difficult to predict. When you back up and you look longer term, you can potentially more reasonably project what a long-term return might be. But short-term projections are very difficult to predict.

Sort of like LeBron James, his average in a 1,000+ game career was 27, 7, 7. So 27 points, seven rebounds, seven assists. If you look at all of those thousand plus games, and you say, "How many times did he actually get that average?" It was actually zero games that he got 27, 7, and 7.

Statistically speaking, he should have gotten that at least once, but he didn't. So it's interesting that was his average over a thousand-game career, but it's hard to pick which game that might occur in.

So, as an investor, what you want to do is “play 1,000 games” or basically, be invested for longer. That's how you get that average over a long-term timeframe rather than trying to pick which specific timeframe to invest for or which specific timeframe you think a certain market is going to outperform another. It's very difficult to do, especially in the short-term.

That’s why we talk about long-term investing. We want to get you a reasonable return over a long-term timeframe. So we don't make short-term market predictions. So as you hear people make projections for 2025, just know they could be wrong.