Knowing the future may not make you a better investor

The National

4 days ago

We have all, at some point, wished we could see into the future – especially when making important financial decisions. What if you could read tomorrow's headlines today? Would you make better investment choices, avoid downturns, and secure your future with ease?
It turns out, perhaps not.
A study by Elm Wealth tested this idea with a group of 118 finance-savvy participants in November 2023. They were each given a sum of money and the front page of the next day's Wall Street Journal. Armed with a real-life glimpse into the future, they were asked to make trading decisions.
The outcome? About half of them lost money. One in six went bankrupt. On average, their returns were a modest 3.2 per cent. Not exactly the stuff of dreams.
The mirage of perfect information
This thought experiment revealed something important. Knowing what will happen tomorrow is not the same as knowing what to do about it.
Many of the participants correctly predicted the market's direction. The trouble was not in the information – they had that in spades – but in how they responded to it. Some bet too heavily on a single piece of news. Others hesitated or spread themselves too thin. The problem was not just guessing right – it was knowing how much to stake and when.
It is a little like knowing that it's going to rain, but not knowing whether to take a raincoat, delay your journey, or cancel your weekend plans altogether.
There is a lesson here for all of us. Financial success is not about reacting to headlines, but about having a plan that holds up whether the news is good, bad, or baffling.
Planning in an uncertain world
We tend to overvalue prediction and undervalue preparation. When it comes to money, the calmer, steadier approach often wins over the clever, reactive one.
A solid financial plan does not need tomorrow's newspaper. It accounts for uncertainty. It balances short-term needs with long-term goals. It includes appropriate risk, careful budgeting, thoughtful investing and regular reflection.
Imagine you are crossing a large body of water. Would you rather have a slightly better forecast for the next few hours, or a boat that is watertight, a reliable compass and enough supplies to make the full journey?
The investors in Elm's study were all given the weather forecast. But most of them had no boat.
The allure and cost of short-term thinking
There is nothing wrong with wanting to improve your financial position. But chasing certainty often leads to poor decisions. History shows us time and again that even professionals struggle to consistently time the market.
We have met investors who spent years jumping in and out of markets, always in search of the next big insight – only to realise they were chasing shadows and leaving returns behind.
The more useful question is not 'what will markets do next?' but 'how can I build a life that does not depend on knowing?'
Small, thoughtful steps beat grand predictions
Instead of trying to predict the next turn in the road, focus on laying strong foundations:
Save regularly, even when markets are dull or difficult.
Diversify – not just across assets, but across time.
Revisit your plans annually, not because you are expecting disaster, but because life evolves.
Keep some margin in your finances – room for error, room for grace.
Add buffers, not bravado. That way, you are not relying on a lucky guess or a perfect moment. You are building resilience – the kind that helps you stay on course even when the headlines shout.
The real goal is peace of mind
In the end, what most people want from their finances is not brilliance – it is freedom, stability and peace of mind. And you do not need a crystal ball for that.
What you need is a financial approach that makes sense for your values, your priorities and your unique journey.
So, the next time you wish you could see the future, pause. Instead of trying to outguess the world, ask yourself: What would it mean to be ready, no matter what happens?