Recently, I was catching up on my reading stack of financial journals and daily periodicals and I was struck by one consistent inconsistency: the conclusions of any given study (research or survey) are always battling the conclusions of another study (research or survey). Public and private institutions are always publishing new or updated interpretations of financial data. It is like watching a daily episode of ‘Family Feud’: “Survey says!” But researchers and survey companies can cherry-pick data sets, such as time periods, to make almost any point. In other words, you can beat data into submission. Mark Twain popularized the phrase, “There are lies, damn lies, and statistics.”
A new survey reveals a pattern.
Politicians, economists, market analysts and investment firms wage war over whose conclusions are, in fact, fact.
Then statistics and attendant conclusions are published and passed along until they are accepted as facts – they become “mutant statistics.”
If you and I, the common folk, pick a side, we are accused of “drinking the Kool-Aid.”
It is OK, if not prudent, to believe in some general truths backed by research and study. Build your foundation on rock, not sand. For example, over long time periods, the data illustrates that stocks have outperformed bonds and bonds have outperformed bank accounts. However, this general truth is not necessarily tomorrow’s fact. Stocks do not always outperform bonds. Stocks do not always produce a 10 percent return. In any given year, or decade for that matter, cash or bonds may win the performance race.
Before we hang our hats and our financial futures on the conclusions of a survey, study or new research let’s swallow a piece of humble pie and drink some common sense. We have to acknowledge that the only constant in life is change. To quote television’s Sergeant Shultz, “I know nothing.” In reality, we don’t know what we don’t know.
We process dozens of financial decisions every
day. It can feel overwhelming. As a result, we may quickly seek guidance in the data or findings of other sources. Stop and think! Have you weighed and measured the variables before making a financial decision?
Have you reviewed multiple sources of data and findings? What does your gut tell you? What have your past experiences taught you? For example, you don’t need the results of a national survey to tell you that many Americans overspend, have too much debt, and often make terrible buy/sell decisions in their portfolio.
At the end of the day, the only statistics that matter to you are your own numbers. You are smarter than you think. You really know what to do. Do it.