“I expect there will be some failures. … I don’t anticipate any serious problems of that sort among the large internationally active banks that make up a very substantial part of our banking system.”

Business Week recently ran a fantastic article about titled “The Worst Predictions About 2008,” with the aforementioned quote attributed to Federal Reserve Chairman Ben Bernanke on February 28, 2008. Though the article is incredibly interesting and worth a couple of good laughs, it teaches one valuable lesson: don’t always invest based on other so called expert predictions.

Though the credibility and intelligence of Ben Bernanke is unquestioned – he’s probably the world’s foremost expert on the Great Depression – should that really have a direct impact on how you invest? The answer is no. Rather, set goals for yourself and meet with a high quality independent financial advisor.

The most important decision when it comes to you investments should be asset allocation, or the allocation of your portfolio to stocks and bonds. Studies have shown this decision alone counts for 90% of your overall portfolio risk and return.  Once you have determined this, diversify among various stocks, bonds, and mutual funds that will be impacted differently based on how the global economy behaves over the next few months. In one environment emerging market stocks may be the pest performer while they are the worst performer in another. It’s vitally important to have dollars allocated to all sectors because, in reality, not even the smartest amongst us can credibly predict the behavior of the markets.

Perhaps the best, or worst depending upon your perspective, quote is:

“In today’s regulatory environment, it’s virtually impossible to violate rules.” – Bernie Madoff on October 20, 2007. Proof below…