Question
Prediction and projection as investment strategies, as discussed in 'The Intelligent Investor', have their own implications. Prediction involves estimating the future growth of a company's earnings through mathematical methods. This strategy can be risky as it relies heavily on the accuracy of the prediction. Incorrect predictions can lead to financial losses. On the other hand, projection involves anticipating future market trends based on current data. This strategy is also risky as it is subject to unforeseen market changes such as inflation, economic recessions, pandemics, and geopolitical upheavals. The book argues that it is a fool's errand for an ordinary investor to attempt making money by timing the market.
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Investors can take advantage of market swings in two ways. Prediction involves estimating the future growth of a company's earnings through mathematical methods. Speculators attempt to time the market by buying based on growth predictions and selling based on predicted declines. Projection is dangerous because the future is uncertain, and inflation, economic recessions, pandemics and geopolitical upheavals often arrive without warning. Graham argues that it is a fool's errand for an ordinary investor to attempt making money by timing the market.
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