Ignore These Financial Advisors

According to a recent survey, many financial professionals are bullish about the coming year. That may sound like great news -- but I don't think it means a thing.

Survey says...
The SEI Advisor Network recently surveyed 442 financial advisors. Drumroll, please: 23% of them were optimistic about the market as we began 2010, and 62% were cautiously optimistic. That totals 85%, leaving only 15% to be apprehensive or fearful.

Anyone familiar with history should be at least cautiously optimistic about the stock market's long-term future. Despite occasional zigzags, hiccups, and plunges, it generally tends to head upward. The market has risen in about 75% of the years between 1929 and 2009. And even when the economy tanks, you can always find some great and growing stocks.

When a poll reveals that the masses are optimistic about the market, they may be more likely to invest, which could drive share prices higher. But while that's certainly a positive sign, it doesn't guarantee anything. And as plenty of studies have shown, getting too confident about the market's chances can ultimately hurt our investing performance.

It's a crapshoot
Despite the common prognostications of various stock market "experts" on TV, no one knows for certain how the market will fare from year to year. Over the past 15 years, the S&P's yearly returns have ranged from a gain of 34% in 1995 to a loss of 38% in 2008.

Moreover, those gains and losses have often come in streaks. Even after two years of losses in 2000 and 2001, the bear market wasn't over. And after two years of big gains in 1995 and 1996, the bull market of the 1990s was still just getting started.

Even the best predictions don't always pan out. Consider our Motley Fool CAPS community, where thousands of investors rate thousands of stocks, predicting how they'll fare against the market. Despite the impressive power of their aggregated opinions, not all of their calls turn out as planned.

The following stocks scored a rock-bottom one-star rating (out of a possible five) last year, but have all fared rather well since then:

Data: Motley Fool CAPS.

Similarly, you can find companies that had top five-star ratings last year, yet nevertheless failed to keep up with the market.

The most sensible way to use stock-market predictions is to ignore short-term forecasts, and focus instead on the long term. Even five-star stocks can have a bad run, but if they're healthy and growing, their share prices should eventually rise.