You probably don’t know much about Peter Thiel. He’s made huge sums of money as a co-founder of PayPal and early investor in Facebook. His investment fund bet on skyrocketing oil prices in 2007-2008 and foresaw the economic crisis that would come when the housing bubble collapsed.

Okay, so now you know a little about Peter Thiel. Enough to know that he’s a pretty smart guy, maybe someone to pay more attention to in the future, maybe someone you’d like to invest your money with. Right?

Or maybe I’m setting you up in order to teach another lesson about what we call “The Trouble with Experts”.

You see, all of those accomplishments of Mr. Thiel’s are true, but the conclusion that he is worth paying attention to is most likely false. Despite some past success, his investors have lost about two-thirds of their money over the past three years. It turns out that he’s had some major blunders along with his winning moves. For example, when oil prices crashed in 2008, he rode it all the way back down. When stocks began to recover in 2009, he didn’t believe a bull market had begun and bet that stocks would go back down.

We’re not picking on Thiel here, just highlighting his story as a reason for investors to be very cautious when they hear of some investing guru talking about the “Next Big Thing”. Nobody gets it right all the time – heck, most are lucky to be right half of the time - yet the financial industry and media tend to focus mostly on the hits while downplaying the misses. This “keep ‘em coming back” sales strategy maintains interest and generates revenue for them, but it’s much more likely to hurt investors than to help them. A hot stock tip sure sounds better when you know someone has had some home run picks in the past, but who would pay attention if they knew how poor the overall batting average is?

Many people have a strong desire to hear others tell them what the future holds, but resisting that desire is likely to protect your hard-earned money over time.  It’s like going on a diet; there are some foods that will tempt you every day, but you just know you should stay away.  We highly recommend a financial diet that is light on expert predictions and media sensationalism.

See our previous “Trouble with Experts” blog article here.