Tea leaves, rabbit feet and Ouija boards aren't the typical tools of the investing trade. Instead, most responsible investors rely on research, analysis, strategy, and conviction to guide them. Still, that hasn't stopped some folks from looking for an easier, or more exciting, approach.
Two professors at Indiana University, for example, believe that the direction the Dow Jones Industrial Average will take can be determined via the collective mood of participants on Twitter. Others market watchers point to supposed correlations between the stock market and the length of skirts, the nationality of the model on the cover of Sports Illustrated's swimsuit edition, or whether it snows in Boston on Christmas. (For those keeping score: Short skirts, a white Christmas, and an American model all suggest the market will rise.)
Feng Shui Predicts...
And now, out of Hong Kong comes another prediction via a leading Asian brokerage, CLSA Asia-Pacific Markets. Just before China's Lunar New Year, it released its 18th annual "feng shui index," and its predictions augur well for Hong Kong's Hang Seng stock market index.
Feng shui is the ancient Chinese practice of improving one's fortune by arranging items in auspicious ways and by choosing promising dates for events. It has its skeptics and its ardent supporters, but when applied to the stock market this year, it's making many believers smile.
That's because this is the year of the black water dragon, and though it's associated with volatility, its appearance predicts a slow start in the first half of the year followed by a strong finish.
The CLSA report gets specific, too, predicting particular success for certain elements, such as water and earth. One specific business singled out for a good year is cement, which should make investors in Cemex (CX) happy. The stock has been beaten down in large part due to the global construction slowdown, but when building eventually picks up, demand for cement will grow.
Hold Your Horses... er, Dragons...
If you're rushing to the end of this article so that you can immediately switch to your broker's website to buy stock in American or Chinese stocks, hold on. The folks at the CLSA Asia-Pacific Markets stress that they offer the feng shui index "with our tongues firmly in our cheeks" -- in other words, it's not meant to be investment advice.
Even without that disclaimer, you'd do well to take these predictions and any others based on such unconventional indicators with a grain of salt. Remember: Even a stopped clock is right twice a day. Those who make a lot of predictions are likely to be right now and then, and it won't always be clear whether any given hit is due to their brilliance or just random luck. And even if you only follow the guidance or example of proven winners, that might still backfire on you: The world's best investors have all made their share of regrettable moves.
What to Do
Instead, when it comes to stock-market investing, it's probably best to stick with tried-and-true routes to success, such as being a responsible investor. Instead of looking for astrology or sports superstitions to influence you, rely instead on research, analysis, strategy and conviction.
Read widely and deeply about the companies and industries that interest you. Study them so that you have a good sense of their competitive advantages and potential. Find exceptionally promising companies and focus your money on your best ideas. Diversify, so that you don't have all your eggs in one or a few baskets. Then be patient, stick to your convictions, and be prepared for occasional losses.
Longtime Motley Fool contributor Selena Maranjian owns shares of Cemex, but she holds no other position in any company mentioned. Click here to see her holdings and a short bio.
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