“I make no effort to predict the course of general business or the stock market. Period.” – Warren Buffett
With the latest technology, weather forecasting has become almost accurate. This makes me wonder if there’s a similar science or art to predicting the movement of the stock market.
Every Monday, market analysts from our country’s three major newspapers forecast the market’s movement for the week. After collecting some of these predictions, I found their accuracy to be less than 50 per cent.
That’s terrible forecasting—akin to flipping a coin. Why bother predicting when the accuracy is so low? It’s misleading for investors.
Well, forecasting is their job, and they are paid to do it. But it’s a tough job, and they could be blamed if things go wrong.
I remember back in 2012, the Philippine Stock Exchange index (PSEi) was around 5,400 points. A colleague of mine predicted it would reach 6,000 points the following year (2013). I was skeptical.
Armed with Warren Buffett’s investment principles, I thought that if that happened, the stock market would outperform businesses by a significant margin, which seemed unlikely.
But in May 2013, the market reached as high as 7,392 points. I sold most of my stocks in April and May. My friend’s prediction was spot on at that time. How many can do that consistently?
If someone could consistently predict the market with high accuracy and invest accordingly, they would be among the richest people in our country. Unfortunately, all forecasters remain just that—forecasters. When asked about the market’s future, I stay silent, not out of fear of blame, but because I genuinely don’t know.
The truth is, that predicting the stock market’s movements is impossible. Benjamin Graham, Warren Buffett’s teacher, claimed that making worthwhile predictions about stock price movements is virtually impossible (Morningstar).
I simply can’t do it, and I don’t want to bother trying. I’d rather analyze the performance of businesses.
What You Can Do
I suggest two options, both avoiding market forecasting because it’s simply not feasible.
1. DIY (Do It Yourself)
If you’re serious about investing in stocks, read books or watch YouTube videos about Warren Buffett and value investing. I can recommend good books if you contact me.
However, this approach isn’t for everyone. If you’re a 9-to-5 employee and a family person, you might have little time to read and analyze businesses. But it’s a great way to become familiar with the market and potentially make good money.
Successful people read a lot. Warren Buffett and his long-time business partner Charlie Munger are bookworms. They are great because of the great books they read. We can read great books as well (Ramsey Solutions).
Utilizing advanced analytical tools and reports from financial and technology solutions such as HALO Technologies can enhance your ability to understand and anticipate market trends.
2. Find a Mentor
Find a mentor who can guide you on what to do in the market and what companies to invest in. This person could be a broker, business analyst, or investor.
Ensure their intent is for your benefit, not theirs. Be wary of sales-driven advice from brokers earning commissions on your transactions. They aren’t the ones you need.
Know whom to listen to. Choose someone with a long-term perspective. I can help without asking for a fee. But there’s one thing I ask: once you make money, be more generous to those in need, give more to your church, or support your favourite charity (InvestorPlace).
Let me leave you with a quote from Warren Buffett:
“We’ve long felt that the only value of stock market forecasters is to make fortune tellers look good. Even now, Charlie and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.”
