Would knowing the future change how you invest?

The idea of somehow getting tomorrow’s news today is an intriguing one. What would you do if you had this knowledge?

In the 1944 movie It Happened Tomorrow, the protagonist, a journalist, is given a newspaper from one day in the future. He tries to use this information to scoop a big story, prevent a box office robbery, and make a few extra bucks betting at the horse track.

In Early Edition, the 1996 TV series with a similar premise, our hero decides to use his foreknowledge only to prevent tragedy. Unfortunately, his best friend, with whom he shares his secret, tries to use the advance information to make money in the stock market.

Investment manager and financial author Barry Ritholz considers a similar scenario on a larger scale: Imagine if you woke up on January 1, 2020, knowing that, within weeks, a pandemic would sweep the world. Would you have been able to beat the market by changing your investments?

This foreknowledge is not as specific as having tomorrow’s stock prices or which horses to pick to win the trifecta in the fourth race. But you’d think that knowing ahead of time about an event as big as COVID19 would position you to make an easy killing.

Not so fast, says Ritholz.

Even knowing for sure that the coronavirus would become a global pandemic does not give you actionable investment direction. Ritholz lists five further pieces of information you would have had to obtain in order to beat the market.

• The severity of the pandemic
• The countries most affected
• The specific ramifications of the pandemic
• The fiscal response by governments
• The sectors and stocks that would benefit from all this

“Once laid out this way,” writes Ritholz, “it becomes clear how challenging investing around a giant global event might be.”

We now know that investors with broadly diverse portfolios, who made no major changes, earned healthy returns in 2020–a surprising result during a global health crisis.

Ritholz notes that investors learn about significant world events every day. And for nearly all of them the best approach is “to do nothing, stick with their plan, and let the markets run their course.”

By the way, the main characters in both It Happened Tomorrow and Early Edition found their foreknowledge to be much more trouble than it’s worth. People get very suspicious when you appear to know too much.

As a prudent investor, you don’t need special knowledge of the future. Instead, you’re better off with a disciplined plan that relies on global diversification to pursue long-term success, no matter what tomorrow’s headlines might say.