As we move toward the end of the year, you'll be seeing lots and lots of predictions for market performance for 2002. I guarantee you that the most popular prediction will be a return of around 10%-11%.

Why? Because every year analysts generally gravitate toward the market's long-run average return, and that return since 1926 is roughly 11% per year.

However, if you truly want to be accurate with a prediction, the last number you should use is the market's long-run average. Indeed, since 1926, the S%P 500 has increased between 10% and 12% just four times (and I'm being generous with the rounding).

In fact, the S&P 500 has increased between 36% and 37% the same number of times - four - since 1926 as the index has increased between 10% and 12%.

The upshot is that, if history is any guide, you're as likely to be right guessing the S&P 500 may increase 37% for 2002 as you are taking the "safe" approach of saying the market may match its long-run average of 10%-11%.

What does all of this all mean? Basically, that year-ahead predictions are probably not worth the paper on which they are printed. Sure, they make for interesting reading. But the fact is that nobody knows for certain how the market will trade. To base investment decisions based on some prognosticator's guess at a return is a mistake.

The securities markets are subject to the risks of fluctuating prices and the uncertainty of rates of return and yields inherent in investing and past performance is no guarantee of future results.

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