Financial Advisor: I have no idea.
Client: But that's your job.
Alternative scenario: Stocks have dropped 10%. Client is bummed out (70s expression)
Client: Why didn't we sell? Couldn't you tell that stocks were going to drop?
Financial Advisor: I don't have a crystal ball. I can't forecast stock prices. Forecasting stock prices is not my job.
Every advisor is familiar with this scenario.
I don't speak for all advisors here. Some, in fact, see themselves as gurus. They see themselves as prophets. Hey, if it works for you, then go for it (referring to clients here). I belong to the "there is more than one way to skin a cat" club. DIY Investor would, however, like to offer the following quote from Benjamin Graham:
If I have noticed anything over these 60 years on Wall Street, it is that people do not succeed in forecasting what’s going to happen to the stock market.
Graham is one of the legends of Wall Street and Buffet's mentor, no less. Again, if you believe your advisor, your newsletter writer, or a talking head on CNBC over Benjamin Graham, then go for it. It's a free country, as they say.
So, if my advisory practice isn't about predicting markets, what is it about? What do I do to earn my fee? I go over this very carefully with potential clients but some don't really hear, although they nod throughout the explanation. So it's worth going over again.
I set up clients with a well-diversified portfolio that will capture close to the market return over the long term. I explain that the portfolio will at times experience choppy waters where markets will get scary, but that it will be able to withstand the down periods and will be positioned to participate in ensuing recoveries. I explain the desirability of down markets for those building up their nest egg and how the process of dollar-cost averaging works. For those in retirement and drawing down their nest egg, I explain the need for a plan - some type of "bucket" approach where a sufficient reserve is kept to ensure that they don't need to liquidate stock holdings at extremely adverse prices.
So when your friend introduces me as his/her advisor, don't be surprised at my response when you ask "so where's the market headed?" It's not my job!