Many may be tempted to make bets on which way a specific asset class may trade. Others will guess as to who will win an election or how much stimulus will be injected into the market is real. We all make forward projections of how we see things one, two or five years from now. But speculating on asset price movements is a difficult and often costly game to play.
Many watching the price of oil, of late, have noticed a sharp increase from lows we saw a few months ago. Some may be kicking themselves for not making an investment sooner. It turns out that buying the dip paid off this time.
However, it is unclear if markets will react the same way in the future, given the fact central banks have used most of their ammunition up so far. Betting on which way the price of oil, or any other asset class, may go in the near term is a fool’s game. However, assessing how the sector may perform over the longer term (say, 10+ years from now) is a much safer and better way to analyze this sector or specific stocks.
Buying options or speculating on stocks that act as options (i.e. those trading well below their book value or newfound penny stocks) ought to be avoided. Investing is not gambling. Now is certainly not the time to start.
Invest wisely, my friends.
