The curious title of this is an acronym originating from four words which greatly affect the outcome investors may receive on their investment plan. Predictions, outlooks, opinions and forecasts are all around us and generally lead to poor performance when followed by the masses.

Turn on CNBC or any investment oriented channel and the day is filled with talking heads that make predictions, render opinions and forecast where prices are headed. Sometimes they’re right, for a while, but for investors following the herd of the most popular investment predictions, history has not been kind.

At the beginning of 2008 Business Week magazine polled 13 well known Wall Street strategists for their forecast for year end level of the S&P 500 Index. The average of the 13 was a gain of 9.8 percent, with only two predicting small losses for the year. We now know that the S&P 500 lost about 37 percent in 2008, one of the worst years ever.

How could they be so wrong? The problem lies in our human brains, and the emotions of fear and greed. We exhibit a continuation bias in our thinking, which leads us to assume that if things are good, they will continue to be good, and when bad, there’s more bad to come. This works well for a while, but eventually leads to failure when major trends change.

At the beginning of 2011, the mantra from Wall Street firms was to own international stocks, especially emerging markets, gold and commodities. Few were touting stocks in the U.S. or Japan. I bet you can guess how that worked out. U.S. and Japanese stocks have been leading the way with nice gains, while emerging markets equities, gold and commodities are all down after almost three years.

The thing to remember is that markets trend. These trends can last from a few months to a few years. Those down over the last three years will have their day in the sun at some point in the future, but those who watch until they feel good about what they hear from the analysts on TV will likely get in at the end of the trend (again) and get frustrated.

Simple, rules-based methods of portfolio management can help overcome these mistakes. Diversification across asset classes can reduce volatility, but even a diversified portfolio can go down substantially in a violent market correction. There are proactive methods of varying your asset allocation over time to reduce risk, but these take more time involvement. I also encourage you to use disciplined, rules-based decision making processes rather than today’s opinion on CNBC or those gut feelings we all get sometimes. We will be right now and then, but also wrong a good percentage of the time.

Good luck and good investing.

Tom Breiter is president of Breiter Capital Management, Inc., an Anna Maria based investment advisor. He can be reached at 778-1900. Some of the investment concepts highlighted in this column may carry the risk of loss of principal, and investors should determine appropriateness for their personal situation before investing. Visit www.breitercapital.com.