In honor of this new school year, let's take a one-question pop quiz:
You walk into your local bookstore and visit the "finance" section. There you see shelves of books with titles like Crisis Investing, How to Prosper During the Coming Bad Years, The Great Money Panic, The Last Days of America and The Downwave.
What era are you in?
A) 1926 - 1934
B) 2000 - 2008
C) 1956 - 1964
D) 1976 - 1984
If you guessed "D) 1976 - 1984," you're right. Do you notice the irony? These frightening books that forecast financial and economic Armageddon came out at the end of a multi-decade bear market -- right before the start of a 25-year bull market.
Fast forward to the late 1990s and early 2000s. Then, popular books had titles like DOW 40,000; 2 Years to a Million in Real Estate; The Roaring 2000s; Real Estate Debt Can Make You Rich and Why It's Different This Time. Yet from 2000 to the present, stocks have made negative net progress, the housing bubble completely collapsed, and banks that were "too big to fail" fell. The worst economic and financial crisis since the Great Depression continues to fester.
And speaking of school, if these financial "experts" were graded they'd likely get an "F." How can they be so wrong at such critical junctures? Because people herd and extrapolate trends. "After all," the authors might have said, "stocks have trended this way for a long time, plus everyone else agrees with me -- so surely the trend will continue."
To be fair, it's human nature to think and do what everyone else thinks and does. But the chart above shows you how unsafe following the herd can be.
Is it possible to think independently and step ahead of the herd?
Let's go back to 1978. Against an extremely bearish climate, Robert Prechter and A.J. Frost published Elliott Wave Principle. This Wall Street classic book reintroduced the world to the Wave Principle -- and accurately forecast a great bull market.
Then in 2002, when everyone else was looking for "DOW 100,000" and "Real Estate Riches," Prechter published Conquer the Crash. This New York Times bestseller foresaw and explained the debt crisis, collapse in home prices, bear market in stocks, the demise of Fannie and Freddie and more.
Recent volatility is a stark reminder to us all that markets can turn on a dime. To stay ahead in your investments, you need a truly independent perspective -- one that helps you think for yourself, doesn't conform to what everyone else is thinking, and even peeks around the bend at what's coming next.
That's what Elliott Wave Principle did. That's what Conquer the Crash did. And that's what Robert Prechter, Steve Hochberg and Pete Kendall do now in the Financial Forecast Service.
The greatest lesson you can learn this school year is how to think and invest apart from the herd. Many will be caught off guard for the next move in stocks. It can be otherwise for you. Find out what Prechter and co. see coming next.