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Thursday , 18 August 2022

The art of predicting the market?

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Mervin Medel
Mervin Medelhttp://Philtimes.com.au
I am a stock market investor. I have been in the Philippine stock market since 2009. I read a lot about value investing and fundamental analysis. I am a big fan of the billionaire Warren Buffett. I use his investment philosophies as my style of investing.

By Mervin Medel

I make no effort to predict the course of general business or the stock market. Period. – Warren Buffett

 

With the latest technology, weather forecasting is now almost accurate. I wonder if there’s a science or art of predicting the movement of the stock market.

Every Monday market analysts from the three broadsheets in our country would forecast the market’s movement for the week. I collected some of them and found out that their accuracy is less than 50 percent.

That’s a terrible forecasting. It’s like flipping a coin. Why bother predicting when the accuracy is far-off? It is misleading investors.

Well, forecasting is what they do. It’s their job; they’re paid doing so. But it’s really a hard job. You might be blamed if a mess happens.

I remember way back in 2012 the Philippine Stock Exchange index (PSEi) was around 5,400 points then. A colleague of mine told me that PSEi would reach 6,000 points next year (2013). I was kind of unsure of what he said.

Armed with Warren Buffett’s investment principles, I thought that if that happens, the stock market would outperform businesses by a big margin; and it cannot be.

If in case that happens it would be high time to sell because the market would be overvalued and eventually nosedive. In May 2013, the market even reached as high as 7,392 points. I sold most of my stocks in April and May.

My friend’s forecasting accuracy that time was high. How many could do that consistently?

You know what, if there’s someone whose accuracy is almost hundred percent and put his money where his mouth is, he could be in the top 50 richest people in our country.

Sadly, all forecasters remain forecasters. When I’m asked what’s going to happen to the market, I’m mum. Not because I’m afraid of the blame, but because I don’t have a clue.

The truth is, there’s no way anybody can predict the movement of the stock market today, tomorrow, next week, or next month.

Benjamin Graham, the teacher of Warren Buffett, claims that it is virtually impossible to make worthwhile predictions about the price movements of stocks.

I simply can’t do it. My accuracy rate for sure is very slim. And I don’t want to bother myself doing that. I’d rather analyze the performance of businesses.

What you can do

I suggest two things, but you can choose the first or the second. Both do away market forecasting, you simply can’t do it. There is no prophet in the stock market, and you can’t be one.

The first is DIY (do it yourself). If you are really, really serious in investing in stocks, I suggest you read books, or watch Youtube, about Warren Buffett and value investing. I can suggest good books for you if you want, just contact me.

I admit this is not for everyone. If you are a 9-to-5 employee and a family man, you might have little time to read books, more so analyze businesses. But this is a good way to be familiar and make good money in the market.

Most successful people read a lot. Warren Buffet and his long-time business partner Charlie Munger are bookworms. They’re great because of the great books they read. We can read great books as well.

The second is find a mentor who can guide you what to do in the market, and even what companies to invest in. She can be a broker, business or security analyst, or investor.

Just make sure that her intent is for your own good and not hers. Know whether her advice is a sales talk or not. Many brokers will urge you to buy this and sell that because they have commission on every transaction you will make. They’re not the ones you’re looking for.

Know whom you listen to. Choose someone who is long-term oriented. Well, I can be of help to you without asking any fee. But there’s one thing I ask of you: once you make money, be more generous to the needy, give more to your church or your favorite charity.

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.

Mervin Medel
Mervin Medelhttp://Philtimes.com.au
I am a stock market investor. I have been in the Philippine stock market since 2009. I read a lot about value investing and fundamental analysis. I am a big fan of the billionaire Warren Buffett. I use his investment philosophies as my style of investing.

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