Price forecasting, as it relates to the stock market, is hardly an exact science. One can never tell how the market is going to be, not entirely, nor can you know what a single stock is going to do with any certainty. If the stock market was easier to predict, then there would be a lot more millionaires and billionaires in the world.
With that being said, price forecasting can tell us with some accuracy what stocks are going to do, barring some unforeseen event happening. Here are five reasons that you should pay attention to stock forecasts and try to take advantage of them.
Avoid Taking a Big Hit to Your Portfolio
Your portfolio should be diversified ideally with bonds and mutual funds as well as stocks. However, regardless of what other assets you have, you should never have all of your money in just one stock. This is especially true if it is predicted that a stock which you own is due for a market correction. It is almost inevitable that this happens sometimes, but if you can predict it, you might be able to unload that stock in time. At the very least, you won’t buy any more of it.
Make Money Quickly
If you’re looking to make quick money in the stock market, you are playing a risky game, but if it is one that you are intent on trying, you can at least try to jump on a stock that is predicted to rise shortly. If you know that a stock is likely to take off because there are credible rumors of a merger or a takeover, then it’s not a bad idea to grab some of it if you have some liquidity.
Even Out Your Portfolio
You should always keep track of any news regarding the companies whose stocks you own. If you hear something potentially disturbing about one of them, but at the same time there is positive news about another, you can do an asset reallocation, where you move some of your portfolios from one stock to another. If you feel that you can predict with some measure of confidence what’s going to happen with your stocks, this can be helpful to you.
Make Predictions Based on Prior Data
The market tends to follow some degree of a pattern as the year progresses. There are certain times, for instance, where the market rises, like just before the holidays, and there are times when it is almost guaranteed to fall, like when there is political upheaval around a presidential election. Because of that, you can know when to buy or sell.
Make Educated Guesses
You can try to guess as to what stocks are going to prove themselves winners right before an IPO. The stock valuation beforehand is going to make possible investors feels a certain way, and maybe because of the faith that you have in the company, you think that a stock is undervalued. Perhaps that’s because the company is at the forefront of a wave of emerging technology. If so, you’ll want to get on board as soon as it goes public. Whether you want to make predictions about crude oil or it’s the McDonald’s stock price forecast that interests you, you should always keep your wits about you as you play the perilous game that is the market. You can make money quickly, and you can lose it just as fast, but price forecasts are a way for you to try and stay ahead of the curve.