There are many of us who very much prefer to take little or no risk with our own money. Keeping spare cash in the bank is the preferred option, as the thought of an investment falling in value is simply unacceptable. There is nothing wrong with feeling this way. Yesterday, the Shanghai Composite index fell more than 5%. My friend, who can only lose S$50, will probably get a shock if he has invested in China-linked unit trusts or exchange-traded funds (ETFs).
Some of us may simply not be ready for taking risks. Others do not have sufficient spare cash to put into risky investments for a wide variety of reasons. However, it would often be beneficial to practise the forecasting of future events or the direction of markets. As the saying goes, “practice makes perfect”. If you can forecast well, you may be more willing to invest, knowing you’ll be more likely to have a profitable investment.
Make use of “wisdom of the crowds” principle to predict future events … what the majority believes to be true, will usually come true.
So what can we do to practise in a safe and riskless way? CashBench came across the CFO Prediction Market recently and suggests this as one possible avenue to practise your forecasting & investing skills without risking any money. The real purpose of the CFO Prediction Market is to make use of "wisdom of the crowds” principle to predict future events. This is based on the belief that what the majority believes to be true, will usually come true.
The CFO Prediction Market allows us to place our own forecast of the future and also see what’s the current aggregate forecasts of everyone else. For the Asian or Singapore investor, some relevant forecasts we can place include the closing price of the S&P 500 stock index, the quarter that the US economy stop falling, or even the date where Boeing carries out its first test flight of the 787 Dreamliner aeroplane. Participants of the CFO Prediction Market can forecast a range for any of these events and more, with an initial “cash balance” of $20,000. For example, a participation may use $1000 to forecast that the first test flight of the Dreamliner will occur between Dec 2009 to Jun 2010. A smaller date range will allow you to “gain” more cash if your prediction is correct.
As you can see, forecasting and investing goes hand in hand. The best way to make use of the CFO Prediction Market is to research on each event, and formulate your forecast based on that. If you are confident of your forecast, you can of course use a larger portion of your cash balance for that forecast. However, without adequate research backing up our forecasts, we are just placing bets without any basis.
To practise your forecasting and investing skills, visit the CFO Prediction Market and create an anonymous profile.
Note: CashBench is not affiliated or commissioned by the CFO Prediction Market to publish this article and did not receive incentives or compensation of any kind from CFO Prediction Market.
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