Miss Wood, a keen predictor who loves to predict various things, including inflation trends, investment portfolio returns, and even Bitcoin prices. Recently, she has made a new prediction that the Federal Reserve will stop raising interest rates, and that disruptive innovation stocks will regain their vitality.
However, what if her predictions are wrong? We have seen the consequences of her failed inflation trend prediction, where no amount of bargain hunting could make up for the loss of 80% of her portfolio value. When making predictions, it is essential to think about the consequences if they turn out to be wrong.
Predicting stock prices or future market trends can create a framing effect that leads to buying at the wrong price and catching falling knives during the wrong times.
On the other hand, we have Warren Buffett, who doesn't pay attention to macroeconomics, Federal Reserve interest rates, or make predictions about future trends. Instead, he buys good businesses at the price he wants, regardless of bull or bear market cycles. By doing so, he eliminates the risk of buying at the wrong time or at the wrong price.
When it comes to stock investment, it's essential to avoid making too many predictions, particularly regarding stock prices. Avoid relying on analysts' target prices and instead ask yourself what price you feel comfortable buying at. Be patient and wait for the price to fall within your desired range before buying and holding the stock. Remember that where the stock price goes is up to the market, not you.
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