Forecasting Helps to Adjust Stock Investing Plan

Forecasting and planning are powerful things in stock investing. If an investor create a plan that is based on reliable forecasts, the plan has better chances to reach projected goals. Forecasting methods can be classified as either subjective (judgmental) or objective (extrapolative). Objective methods are regression analysis, time series methods, different moving averages, and other statistical methods.

Some forecasting methods use the correlation between causing factors and output forecasting parameter. For example, quarterly financial reports can help to predict the stock price, i.e., identify how the stock market would react to publishing these reports. The historical data themselves can be causing factors for future movements. Some methods employ this idea together with statistical methods, for example, cycle analysis and neural network.

Investors should try to have all possible information about the stock and its environment before starting investing. It would be easier to have a good investing plan if an investor could predict the acceptable outcomes. As a rule, we cannot change the environment to be favorable for us. However, we can create a good plan to reach our goal. In addition, it is better to have “plan B” or even a few plans in case if the future will not look like it was predicted.

© Alex Shmatov. Published with permission of the copyright owner. Further reproduction strictly prohibited without permission.