We have had a few weeks away from the office but are starting to wind up the springs for what will certainly be another "interesting" year for investment markets.  In preparation for a new year it is natural to be looking for those special tips to claw back some of those losses from 2008.  But be warned, forecasting is just another layer of risk for your portfolio.  For us, it is a layer of risk for which investors are not consistently rewarded for taking on.

Today's Australian newspaper provided further evidence of the risks involved with following forecasters.  It included a frank admission that the panel of 8 expert stock pickers they turned to at the end of 2007 have produced tips that underperformed the All Ordinaries index for the year - Stock pickers looking for new crystal balls.

The figures had the aggregate of the panelist recommendations providing declines of just over 50% while the All Ords index has fallen by 45%.  Not a huge difference, but for us every percentage point is important.

One point the article does not make is that investors would have been even better served by investing into developed world international markets.

It will be interesting to see the forecasts that are made for 2009.  As the article suggests in the opening paragraph, it might actually be better to listen to the advice and do the opposite.  Better still, why not employ an index based approach, diversify your portfolio across a range of asset classes - cash, fixed interest, Australian shares, international shares and listed property.  Please take a look at our Building Portfolios page for more details.

2008 has highlighted again that nobody really knows what is going to happen in the year ahead, a better strategy is to take away this forecasting risk from your portfolio.