What the Olympic Commentators Taught Me
The other night, my wife, my parents, and I were watching the individual gymnastics finals for the women's vault. I'm not sure why it bothered me so much, but when the commentators gave their "expert" opinion on how things would play out, I semi-lost it.
I don't have an exact quote -- damn those trolls who keep NBC's copyrights enforced on YouTube -- but it went something like this: "It's pretty obvious that USA's McKayla Maroney's going to win gold. All the other girls are just focusing on silver. It's a foregone conclusion."
Excuse me? Why in the world are we even having the competition if it's a foregone conclusion? Shouldn't they just compete for silver while Maroney gets the gold based on the "expert consensus"? Have these commentators never heard of the Miracle on Ice, watched the Cardinals' ridiculous run to a championship last year, or seen the heavily favored Patriots lose twice to the Giants in the Super Bowl?
Sure, preparation matters in sports. But once the game starts, you can throw it all out the window. No one knows for sure how things will play out, but it's what happens on the vault (or the field, or the court) that really matters -- nothing else.
I was put in the uncomfortable position of still rooting for Maroney, knowing that if she did win, not much attention would be paid to these brazen statements of fact. But those of you who watched know what happened: Maroney fell on her second vault, and Romania's Sandra Izbasa ended up taking the gold.
So much for the foregone conclusion.
Turning the Foolish mirror on myself
And yet, when I was thinking about what I'd just seen, I couldn't help but think that in the past, I've slipped into the trap that the Olympic commentators did. Even when I include carefully selected words like "could" instead of "will"; when describing a stock's potential, I'm guilty of much the same sin.
Last year, I wrote an article called: "These Stocks Could Double Over the Next 2 Months." There's that key word I used to cover my butt: "Could." I guess that makes me a little better than the Olympic commentators, but not by much.
Well, here's how the five stocks I picked out actually performed over the following two months:
|Company||Returns, July to September, 2011|
|Ebix (NAS: EBIX)||(19%)|
|Entropic (NAS: ENTR)||(51%)|
|First Solar (NAS: FSLR)||(17%)|
|SodaStream (NAS: SODA)||(35%)|
|Coinstar (NAS: CSTR)||(10%)|
Source: Google Finance.
Pretty awful, huh?
My errors were many. First and foremost, I believed that a short-squeeze was highly likely, and that these companies would report higher earnings than investors foresaw. I also made the mistake of trying to guess where each companies' stock would go over a relatively short time period. As many Fools know, we advocate taking a minimum three-year time horizon when investing.
But even when we do our Foolish best to make cool-headed, rational investing decisions, we are prone to the same error: assuming that we've got a unique insight into the future. The simple fact of the matter is that no one -- not even investing greats like Warren Buffett or our own David Gardner -- can predict the future.
So let this story act as a mea culpa. In the past, I have written things as if they were an absolute truth -- but included wording to technically make it a prediction.
In the future, when I talk about stocks that I'm thinking of buying, I'll try my level best to make one thing clear: What I'm writing are simply the thoughts that I've had while reasoning out what I'll invest in. There is absolutely no guarantee that I'll be right or wrong.
There are tons of things you can do with whatever left over money you're lucky enough to save. You can invest it, let it be, or give it away -- among a plethora of other options. Clearly, Fools think investing in the stock market is worth considering. But we don't have special access to the future either, so look at us as more of a depository of ideas for you to weigh.
Now, let me offer you access to a special free report containing three ideas we have in our depository: Middle-Class Millionaire-Makers: 3 Stocks Wall Street's Too Rich to Notice. In no way is the report you'll read guaranteed to make you any money. You'll see how some of our Foolish analysts think about three companies they think aren't getting much love from Wall Street right now. Get your copy of the report -- and some new ideas to digest -- today, absolutely free!
The article What the Olympic Commentators Taught Me originally appeared on Fool.com.Fool contributorBrian Stoffeldoes not own shares of any of the companies mentioned. The Motley Fool owns shares of Ebix and Sodastream International.Motley Fool newsletter serviceshave recommended buying shares of Sodastream International, Coinstar, and Ebix. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
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