George Soros Rule for Investing
In a quote from an article in Bloomberg, George Soros emphasizes the unpredictable nature of the stock market. He believes the market operates on the grounds of irrational behavior and trying to predict it is an unnecessary and useless effort. At the beginning of 2015, for instance, the market was in a decent condition, but it took a turn for the worst during the second half of the year due to crashing oil prices, the threat of ISIL, and political uncertainty in the U.S. In fact, the S&P 500 was flat at the end of 2015.
Evidence for The Unpredictability of The Stock Market
The iShares Nasdaq Biotech ETF defied predictions from analysts and pundits in 2010 about biotech stocks being dangerous. From early 2010 to late 2015, this stock performed remarkably well with a more than 307% rate of growth. On the opposite end of the spectrum, Gilead Sciences underperformed its expected growth of 30% with a mere 9.2% outcome. Surprisingly, the small-cap cancer drugmaker Exelixis outperformed Gilead Sciences even though it started out with negative cash flows and a weak financial outlook. In fact, Exelixis gained more than 240% in 2015.
What Makes George Soros An Expert on The Stock Market
George Soros has been thought of as perhaps second to only the legendary Warren Buffett in the world of investing, and his views carry a heavy weight with current investors. He held a position as head of the Quantum Fund with tenure, during which time he was able to average returns of more than 30% per year for investors. He achieved his success upon the principle that what should happen rarely does happen in the stock market, and in his view, the markets predict actual value poorly.
Advice From George Soros for 2016
Global geopolitical and economic headwinds look to be steering the market down a tough path for 2016, but George Soros would encourage investors to not be concerned with predictions. In his view, investors should prepare to take advantage of dips in the market, and they should stay invested for an unexpected turn around in market conditions.