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How to predict the future

You always make decisions on the best available information you have. Hopefully what you have are lots of facts, but usually you have to make assumptions. This is true for all decisions you take in life. Even small decisions, such as what food you want to eat, are weighed in your mind before you choose to go in a direction. When it comes to investing there are many choices and decisions that need to be done to get to the results that you want to have.

What is a prediction? Is it magic?

Predicting what is going to happen in the future may seem impossible. The idea of someone just KNOWING what is going to happen with everything in the world just doesn’t seem likely. But a prediction isn’t really about knowing or just guessing, and it isn’t about having control of everything in the world. It is about taking the sum of your experiences and knowledge and trying to make an EDUCATED estimation of what is more likely to happen in a specific area. The way to make more informed decisions when something is unknown is to calculate the probability of what the unknown will turn out to be.

Some of these calculations are so obvious that we don’t even call them predictions. For example, every time you buy something in a store you may predict that you will get change back and a receipt. If you think about it, anything else could happen. A bomb could go off, the clerk could decide not to give you your change, a robber could enter the store… The possibilities are endless. But, usually, based on experience, you know that you will get your change. The same type of predictions can be made in every aspect of your life – some with high probability of coming true, others with lower probability.

It is important to remember though, that even when the likelihood is very high of something happening, or very low for that matter, it doesn’t mean that it will absolutely or absolutely not happen. There are always black swan events.

Stock market predictions

Making predictions about stocks that have millions of different factors to weigh is a challenge, but it is not magic. Since stocks are such a popular subject for people to study there have been many methods produced that work more or less well for predicting what is going to hoppen to a stock. Remember that at the base of it all, most people only care if the price of a stock is going up or down, and possibly whether or not there will be relatively good dividendsA dividend is a payment made by a corporation to its shareholders, usually as a distribution of... from owning the stock down the line. This is the core of what investing is all about. There are other predictions that professionals try to make – such as predicting overall trends in the markets, or focusing on particular details such as if one stock will move higher than another, or if one sector of stock will be more interesting to look at than another depending on your time frame.

At the basis of all stock predictions are math. Numbers are compared – either technical or fundamental numbers. It can be about looking at a company’s returns during the last year or the last quarter. It can be about looking at how many people have bought or sold the stock at different price levels and ranges. Either way, whatever is being done to predict how a stock is moving – it can be automated and done by a machine. And this is where we come in.

Traditional methods with modern technology

At Stocksholm we use algorithms that calculate the likelihood of a stock increasing in price in the long run. We filter through the complete stock markets and rate the stocks against each other. This would never have been possible without the use of computers. However, the methods we use to rate the stocks are still based on traditional, human, research. It is the perfect blend of using technology but without removing the human input.

If you want to you can choose to let the computers (or “robots” as we like to call them) do the complete choice of stocks for you to buy and be happy with that. If you still feel like you need to put your own touch to it and make your own choices, you can go through our database and pick the stocks that resonate with what you like and feel. Either way, there is no need for you to spend days or weeks doing calculations or reading through company reports – all of that is automatic.

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