Like lawyers and politicians, economists are often the brunt of jokes, wisecracks and famous quotes. Peter Lynch, famed mutual fund manager for Fidelity, once noted: “As some perceptive person once said, if all the economists of the world were laid end to end, it wouldn’t be a bad thing.” (1) And, even John Kenneth Galbraith, a famed economist himself, once said: “Economics is extremely useful as a form of employment for economists.” (2)

Why is it that people like to pick on economists? And is there a lesson here for the average investor?

Economics is a very complex field. There are so many variables that it seems that no two economists can ever agree on where the economy is headed. And, if economists can’t agree on the direction of the economy, why would one expect that investment gurus could successfully predict the short-term direction of the markets?

We believe that the seeming inability of economists to agree on where the economy is headed lends support to many a financial advisor’s belief that it’s futile to try to time the market. The lesson from economics, therefore, is to adopt a broadly-diversified portfolio tuned to your individual risk tolerance and objectives and then rebalance that portfolio on a regular basis. You may not beat the market but we expect you’ll do quite well over the long run.

(1), (2) both quotes taken from “The Quotable Investor”, The Lyons Press