Sunday, 14 February 2016

Stock market is a game of prediction

What? You must be kidding, Z !

That was one of the reaction immediately when I told one of my business associates who is very savvy in business but not doing so savvy in stock market.

If stock market is indeed game of prediction, then it is no different with gambling, was the next disbelief response. Actually I already know that going be the response. In fact not only it will come from him but will likely by most people, if not all.

Late last year, stock market brought back some shine to many people. Many stocks hit new high. This brought back many retail players into the market. Then not long after that, in January, the market was badly shaken. In fact, many economists have predicted the economy of the country will not be doing well long before 2016 greets us. Yes. Many economists predicted that. And on the same backdrop, many stock market experts too predicted the stock market won't be doing well in coming months. There were many whispers predicting December 2015 was going to be last window dressing exercise to help prop up some stock prices before headwinds going to hit us in 2016. On the other hand, in the midst of these headwinds, some analysts predicted which sector of stocks to invest in to reap maximum profits. Some go as far as to use fengshui to help reinforce that prediction. Some use technical analysis to predict the behaviour of stock price. So you see. 

Everyone and anyone is trying to predict what will happen to the stock market in the coming days or months. Everyone and anyone who buys stocks is based on his or her prediction that stock will perform. With the onslaught of some many predictions, our hands are so full that we don't know which one prediction is more accurate than the next one. Many people failed in stock market because they use the wrong prediction based on the wrong reasons and from the wrong sources at the wrong time.

If one predicts December 2015 is going to be window dressing exercise, one would have high tendency to buy in Nov and sell when price is up in Dec. This kind of prediction might be true but it is wrong reason to buy stocks.

But if one chooses the prediction of foreign funds might be coming back because of MYR currency is so weakened now that it is cheap for them to come back to our shore, one might consider to higher the bet based on this prediction.

That brings me back to the stock that I fall in love this year. I believed in the prediction that the company will do well based on the information I received and trusted with good reasons. But it is still a prediction on that of its stock price performance. No more no less.

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