Get new articles by email:

Oblivious Investor offers a free newsletter providing tips on low-maintenance investing, tax planning, and retirement planning.

Join over 20,000 email subscribers:

Articles are published every Monday. You can unsubscribe at any time.

Why the Stock Market is Unpredictable

The value of a stock is, essentially, a function of the amount of dividends it can be expected to pay in the future. Therefore, at any given point in time, the current market price of a stock reflects the sum total of the investment community’s expectations about the company’s future dividends.

Therefore, if the market’s expectations for the company’s dividends turned out to be precisely true, the value of the stock should not change over time.

Of course, stock prices do change over time. In fact, they’re constantly changing. Why? Because people’s expectations for the underlying companies are in a permanent state of fluctuation. New information comes to light on a daily basis that either improves or worsens the outlook for the companies in which we’re investing.

In short–as we’ve learned all to poignantly over the last year–we’re not very good at guessing.

And on a larger scale…

The same difficulty exists with trying to predict the future profits of the entire economy. All day long everyday, there’s news being released that makes people either more or less confident in our economy. There’s a functionally infinite amount of information involved, far more than anybody–or even any computer program–could keep track of.

What should we do about it?

First, accept the fact that the market is not predictable over short periods. Anybody trying to tell you otherwise is simply trying to make a buck off your gullibility. Ignore them.

Next, develop an investment plan that doesn’t require you to be able to predict the unpredictable:

New to Investing? See My Related Book:


Investing Made Simple: Investing in Index Funds Explained in 100 Pages or Less

Topics Covered in the Book:
  • Asset Allocation: Why it's so important, and how to determine your own,
  • How to to pick winning mutual funds,
  • Roth IRA vs. traditional IRA vs. 401(k),
  • Click here to see the full list.

A Testimonial:

"A wonderful book that tells its readers, with simple logical explanations, our Boglehead Philosophy for successful investing." - Taylor Larimore, author of The Bogleheads' Guide to Investing


  1. You took the words right out of my mouth Mike.

    In the short-run, the market runs on supply and demand – all fueled by emotion.

    In the long-run, its all about earnings.


  2. These common sense post are the reason I love reading your blog.

Disclaimer: By using this site, you explicitly agree to its Terms of Use and agree not to hold Simple Subjects, LLC or any of its members liable in any way for damages arising from decisions you make based on the information made available on this site. The information on this site is for informational and entertainment purposes only and does not constitute financial advice.

Copyright 2023 Simple Subjects, LLC - All rights reserved. To be clear: This means that, aside from small quotations, the material on this site may not be republished elsewhere without my express permission. Terms of Use and Privacy Policy

My Social Security calculator: Open Social Security