Every new year is filled with financial strategists, pundits and gurus weighing in with their predictions and forecasts for the financial markets.  You can see this year’s many examples over at Pragmatic Capitalism. The problem is not in the forecasts themselves which will if history is any guide turn out to be a mixed bag by year end.  The problem is when investors take these forecasts seriously and adjust their financial plans accordingly.  This is by all accounts confuses what is an exercise in publicity with actual investing.

Carl Richards, the now controversial, financial planner and author has made frequent appearances on Abnormal Returns via his work at the Bucks Blog and Behavior Gap.  Carl is also the author of the newly published book, The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money. This excerpt from Carl’s book talks about the mistake we make in confusing what we see and hear in the financial media with actual investment advice.

Investing Is Not Entertainment – Carl Richards

We get into trouble when we confuse investing with enter­tainment.

A decade or so ago, investing had become America’s fa­vorite spectator sport. Everywhere you went people were talking about finding the next hot stock, mutual fund, or alternative investment. Magazines with covers like “Ten Hot Funds to Buy Now” and “Five Stocks That Sizzle” made in­vesting sound fun. You couldn’t turn on the television with­out seeing some lout screaming “Buy! Buy! Buy!”

Most of the stock market coverage in the media was de­signed to appeal to our fantasies about getting rich quickly—our wildest financial hopes and dreams. And most of us were eager to swallow the story that we could get rich quickly in stocks. So, despite knowing at some level that market timing, stock picking, and day-trading are hazardous to our wealth, many people still did those things.

Source:  Carl Richards

Every one of those investors would have benefited from asking these questions: Am I investing to meet my most im­portant financial goals, or am I investing as a form of enter­tainment? Am I being realistic, or am I letting my fantasies run away with me?

Sure, investing is fun while you’re making money. And it’s fun to indulge in occasional daydreams about getting rich the easy way. But this is not Monopoly. This is real life. We’re dealing with real money and real goals. When we for­get that—when we confuse investing and entertainment—we almost always end up behaving badly.

So next time you are tempted to “play the stock market” maybe you should go to the movies instead.

Excerpted from The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money. Published by Portfolio/Penguin. Copyright Carl Richards, 2012.

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Please see disclosures here.

Please see the Terms & Conditions page for a full disclaimer.