Who Can Predict Which Way The Stock Market Will Go?


Who can accurately predict which way the stock market will go? The answer is: no one. There's many so called experts who try to predict the market direction, but no one can truly predict the future.

Charles Dow said it best, "People in Wall Street, even those who get very near the center of large operations, do not know what the market is going to do with any regularity or certainty."

Forget about trying to figure out which way the market will go. Focus on building a portfolio of quality dividend paying stocks with a high margin of safety. Again Charles Dow provides some guidance, "Nothing strengthens a stock more than margin of safety in dividend earnings, and nothing weakens a stock more than doubt in regard to the stability of dividends.  It is unquestionably better for a stock that a company should pay 5% and earn 10% than to pay 9% and earn 10%, because, in the latter case, the small margin of safety must be a great element of weakness in the price." Here Mr. Dow is writing about the dividend payout ratio, a low ratio provides a better margin of safety. You can read all about the payout ratio in my earlier blog post here.

Mr. Dow started writing about investing in stocks back in 1889, and 126 years later we still see folks trying to predict the stock market. The key is to remain focused on the things that matter:  invest in quality dividend paying stocks with a high margin of safety.

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Photo courtesy of Wikipedia (https://en.wikipedia.org/wiki/Charles_Dow)
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