Human beings are hard-wired to tell stories about our experiences, and "tidy narrative structures" help us make sense of the world, Mr Parker said.
"This impulse tends to really kick in around the end of the calendar year when we’re taking stock," he said.
Media outlets like to tell investors that this year has all been about 'X' and that next year will be about 'Y', Mr Parker said.
"Problems can arise when individual investors act on those forecasts, overlooking how much each scenario is dependent on a whole host of other assumptions," he said.
"Ultimately, the world is much more complex than any conventional narrative can accommodate," Mr Parker said.
Furthermore, all of the views contained in a year-end outlook are already reflected in market prices, he said.
"This is no reflection on the skills of forecasters, by the way. Their cases may be based on first-rate analysis," Mr Parker said.
"But because they can’t forecast every variable and because new information is always coming into the market, their assumptions can quickly go awry," he said.
Rather than relying on forecasters, investors harness the collective information already built into stock prices; diversify (both overseas and between asset classes); and focus on the things that can be controlled, Mr Parker said.
"Letting go of the idea that successful investment comes from making accurate predictions about the market and economy can free you up to focus on what is within your control – like asset allocation, diversification, costs, taxes, discipline and rebalancing," Mr Parker said.
