This post was last updated on April 21st, 2020 at 10:42 pm
Predicting the Stock Market, Why Even Forbes is Wrong
As proof that there is nobody in the world who is completely accurate in predicting the stock market this article will cover an experiment that is a little extreme. I will be picking ten stocks at random and comparing those ten chosen to the top ten by Forbes. After taking a list of 8908 stocks, having a “market monkey,” a.k.a. the code I wrote to pick x random stocks, pick 10 stocks this article will compare both of our predictions, and explain why the market is so unpredictable.
Predicting the Stock Market with Math
I will be fully honest; it is very possible with Firm foundation theory and P/E ratio to predict specific stocks’ behavior over a period of a few months. Short term it can also be predicted by looking at trading volume and focusing closely on castles being built in air. The stock market has some rhyme and reason to it, however, this is not easily projectable. It is so volatile that anything can happen at any time. It is important to understand that no matter how much math and calculation you do on different stocks, it is almost always, unless you have a rabbit’s foot up your ass, more lucrative to invest long-term in major indexes such as the S&P 500.
Stock Market Pick Breakdown
These numbers are accurate at the time of posting this on 4/16/20
Forbes’ 10 stocks for 2020
Kohl’s (KSS) – (-64.1%)
Kronos Worldwide (KRO) – (-36.5%)
Edgewell Personal Care (EPC) – (-17.1%)
Alliance Data Systems (ADS) – (-70.7%)
Party City Holdco (PRTY) – (-82.8%)
Natural Grocers by Vitamin Cottage (NGVC) – (-4.3%)
Cohen & Steers Infrastructure Fund (UTF) – (-24%)
Brandywine Realty Trust (BDN) – (-33%)
Walmart (WMT) – (+11.3%)
Corning (GLW) – (-33.8%)
Market Monkey’s 10 stocks for 2020
PARK-OHIO HOLDINGS CORP (PKOH) – (-56.2%)
HYATT HOTELS CORP – CL A (H) – (-39.5%)
CENTENNIAL RESOURCE DEVELO-A (CDEV) – (-94.2%)
PEOPLE’S UNITED FINANCIAL (PBCT) – (-37%)
CROSSAMERICA PARTNERS LP (CAPL) – (-49%)
ALERIAN MLP ETF (AMLP) – (-54.5%)
S&P GLOBAL INC (SPGI) – (-1.1%)
INVESCO EMERGING MARKETS SOV (PCY) – (-18.3%)
GOLD FIELDS LTD-SPONS ADR (GFI) – (+1.5%)
PAYCHEX INC (PAYX) – (-25.1%)
If you had invested 10,000 dollars into each of these portfolios, with 1000 dollars going into each of these stocks. If you had believed that Forbes can predict the stock market then you would have lost $3,550 or 35.5% of your investment. Now if you had trusted what is essentially a monkey throwing darts at a dart board then you would have lost $3,734 or 37.34% of your investment. Now the numbers don’t lie, Forbes definitely has our algorithm beaten, but is it wise to trust someone that can only beat a monkey by 1.8%? We certainly don’t think so. The best Idea when it comes to investment is to invest long-term in a highly diversified portfolio. Ten stocks are not diversified, think hundreds. Most people lose more money trying to invest in single stocks than ETFs, index funds, and mutual funds. In summation, you’re better off picking stocks out of a hat or giving a monkey a handful of darts than trusting any website, magazine, or newspaper on which stocks you should be betting off.
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