Sometimes you just need to trust people on certain things to be able to make useful decisions having very little or no knowledge in the subject.
One useful way of dealing with this is to look at the past performance of the person.
Assuming you have no other information about the market, if you see a person having track record of well-reasoned, accurate market predictions it is probably as good signal as it gets that you should trust their predictions.
Ideally you would want to check this with other people having knowledge in the topic (and also good track record), check that their knowledge is still applicable to circumstances (if they were able to give good predictions in peace maybe they are not suited to doing this in the time of war) and hopefully also educate yourself just a bit to be able to ask clarifying questions and spot obvious problems.
The general problem is each has a mental (or computer) model of the world that is a vast simplification of the world. When they get it right it sounds like they understood and accounted for all the variables. They never did.
Being right means little when there are 100s of folks with predictions and reasons.
1) Send out a bunch of letters predicting moves on (usually) penny stocks; a different set of stocks is used for each letter
2) A few days later, cull the recipients whose predictions didn't work out. Send another batch of predictions, again individually varied, to the remainder
3) Repeat once or twice more and you've got a small list of people who've received three or four correct predictions in a row. Hammer them with solicitations to invest in your "foolproof" scheme
4) Collect (via a pump-and-dump, or just solicit the money directly and run)
Nowadays it's probably happening in Telegram groups or some such. Or you could do this on Reddit et al. using different usernames, and only keep the accounts that were right.
> Before we begin this examination, I would like you to imagine a national coin-flipping contest. Let’s assume we get 225 million Americans up tomorrow morning and we ask them all to wager a dollar. They go out in the morning at sunrise, and they all call the flip of a coin. If they call correctly, they win a dollar from those who called wrong. Each day the losers drop out, and on the subsequent day the stakes build as all previous winnings are put on the line. After ten flips on ten mornings, there will be approximately 220,000 people in the United States who have correctly called ten flips in a row. They each will have won a little over $1,000. Now this group will probably start getting a little puffed up about this, human nature being what it is. They may try to be modest, but at cocktail parties they will occasionally admit to attractive members of the opposite sex what their technique is, and what marvelous insights they bring to the field of flipping. Assuming that the winners are getting the appropriate rewards from the losers, in another ten days we will have 215 people who have successfully called their coin flips 20 times in a row and who, by this exercise, each have turned one dollar into a little over $1 million. $225 million would have been lost, $225 million would have been won. By then, this group will really lose their heads. They will probably write books on “How I turned a Dollar into a Million in Twenty Days Working Thirty Seconds a Morning.” Worse yet, they’ll probably start jetting around the country attending seminars on efficient coin-flipping and tackling skeptical professors with, “If it can’t be done, why are there 215 of us?” By then some business school professor will probably be rude enough to bring up the fact that if 225 million orangutans had engaged in a similar exercise, the results would be much the same — 215 egotistical orangutans with 20 straight winning flips. I would argue, however, that there are some important differences in the examples I am going to present. For one thing, if (a) you had taken 225 million orangutans distributed roughly as the U.S. population is; if (b) 215 winners were left after 20 days; and if (c) you found that 40 came from a particular zoo in Omaha, you would be pretty sure you were on to something. So you would probably go out and ask the zookeeper about what he’s feeding them, whether they had special exercises, what books they read, and who knows what else. That is, if you found any really extraordinary concentrations of success, you might want to see if you could identify concentrations of unusual characteristics that might be causal factors. Scientific inquiry naturally follows such a pattern. If you were trying to analyze possible causes of a rare type of cancer — with, say, 1,500 cases a year in the United States — and you found that 400 of them occurred in some little mining town in Montana, you would get very interested in the water there, or the occupation of those afflicted, or other variables. You know it’s not random chance that 400 come from a small area. You would not necessarily know the causal factors, but you would know where to search. I submit to you that there are ways of defining an origin other than geography. In addition to geographical origins, there can be what I call an intellectual origin. I think you will find that a disproportionate number of successful coin-flippers in the investment world came from a very small intellectual village that could be called Graham-and-Doddsville. A concentration of winners that simply cannot be explained by chance can be traced to this particular intellectual village.
https://www8.gsb.columbia.edu/articles/columbia-business/sup...
Eddie Lampert is a great example of a (brilliant) graham and doddsville guy who basically got squashed by not understanding the world had changed.
Over the past 20 years the tech "intellectual village" has been the smart money. They'll probably be for another 20 years. And then someone will point to it with a similar explanation that Buffett had. And then they'll get crushed by whatever multi-decade driving force comes next.
Survivorship bias, survival bias or immortal time bias is the logical error of concentrating on the people or things that made it past some selection process and overlooking those that did not, typically because of their lack of visibility.
https://www.reddit.com/r/Bogleheads/comments/wpqsno/lumpsum_...
And here's a question. Say you have a windfall and you're deciding whether to lump sum or DCA it. And you decide to DCA. So therefore, why wouldn't you liquidate your entire investment portfolio and also DCA that the same way?
I'm trying to point out the irrationality of it - after all, I don't think people desist from liquidating only for tax/fee reasons. "I would sell everything today and DCA back in over the next year if not for those pesky taxes and fees! (shakes fist at sky)"
If at the beginning of 2022, I'd had a crystal ball saying "stocks will crash in March then rebound in December", then I have a motivation: I do want to switch to a stock-light position, hold that for a while, then move back. In that situation I'd be inclined to DCA on the way out in January, as well as DCA back in during December.
I want to reduce variance more than I want to increase the expected value.
There is historical data showing that in 2/3 cases, lump sum is better. That says exactly nothing about which will be better today or tomorrow. The future is unknown.
https://static.twentyoverten.com/5980d16bbfb1c93238ad9c24/rJ...