Studies suggest that it is not wise to put too much faith in any market analyst or commentator – but it may be wise to listen to as many of them as possible.
There have been many studies surrounding the predictions of financial analysts who seek to foretell the direction of the economy, particular sectors, or even individual stocks. The studies reveal that it isn’t wise to rely on the forecasts of any one commentator or analyst.
What is useful, however, is the collective wisdom of many analysts. If 9 out of 10 analysts have a “Sell” rating on a particular stock, it’s probably not a good idea to buy it.
On the other hand, if 9 out of 10 analysts have a “Strong Buy” rating on a stock, you can consider this position a pretty safe bet, though it will probably not make you extremely rich.
Most of the large investment houses publish their own analyst ratings and commentary, so you should be able to find plenty of opinions that can help you form your own.
It’s a good idea to keep track of the recommendations of each analyst or firm and to remove them from your list if they repeatedly fail to hit the mark.
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