Which one do you use? Technical or fundamental analysis?

[cuttlefish]

Re: Which one do you use? Technical or fundamental analysis

Seeing as this is sitting in the beginners' thread, can I ask what if for argument's sake we say that technical analysis provides the greater returns, but the investor is not confident/competent enough to use it and is happy with the returns from some solid research and a more conservative buy-and-hold strategy that produces good dividends but a slower capital growth. Isn't it better to be in the market in this capacity than not at all?

Would I, for example, be foolish to gear into some blue chip stocks, watch the market to the best of my ability, make a few mistakes along the way but hopefully come out on top in the end; or, if this is the limit of my current abilities, salary sacrifice into super with the knowledge someone else has the expertise to make it work? Although the second option doesn't sound as much fun.

Although its copped a fair bit of criticism in this thread, a fundamentals based approach will teach you a lot. There's probably no clear safe option for a beginner entering the market, because the first thing to overcome in sharemarket investing is your emotions which will come into play regardless of your approach, but investing in companies with sound fundamentals is likely to lower your downside risk. Its important to do your research thoroughly though.

Even if you end up deciding trading is a more profitable way of working the market there is no harm in understandinging and interpreting the basic financial aspects of companies like P&L, cashflow, balance sheet, capital structure etc.

 

[wayneL]

Re: Which one do you use? Technical or fundamental analysis

Although its copped a fair bit of criticism in this thread,

I dont think FA has copped it in this thread. What has copped it is the divergence of rhetoric and practice.

OF course FA is valid... essential for long term holdings.

What sets the TA's off is TA getting slagged off at unjustifiably. It is usually done without thought and merely parrots what a few people with vested interests have say, for the sake of sales. eg Rivkin, Fitzherbert and other such tosspots.

Or they read Graham or Buffet and have a religious epiphany! LOL

 

[Realist]

Re: Which one do you use? Technical or fundamental analysis

what if for argument's sake we say that technical analysis provides the greater returns, but the investor is not confident/competent enough to use it and is happy with the returns from some solid research and a more conservative buy-and-hold strategy that produces good dividends but a slower capital growth. Isn't it better to be in the market in this capacity than not at all?

If TA gives you greater returns longterm how the hell did Warren Buffet make US$60,000,000,000 doing fundamental investing, buying undervalued companies on a downtrend and holding forever?

Or they read Graham or Buffet and have a religious epiphany! LOL

Graham is the god of investing alright. Warren Buffet recognised thsi and begged him to teach him. Buffet improved on it ever so slightly buy holding forever and not always looking for a good discount.

 

[swingstar]

Re: Which one do you use? Technical or fundamental analysis

If TA gives you greater returns longterm how the hell did Warren Buffet make US$60,000,000,000 doing fundamental investing, buying undervalued companies on a downtrend and holding forever?

He didn't have the processing power available today.

 

[Bobby]

Re: Which one do you use? Technical or fundamental analysis

I held and held and held. It worked!! I'm still holding.

.

Better stop soon , you could go Blind

 

[Realist]

Re: Which one do you use? Technical or fundamental analysis

He didn't have the processing power available today.

My god, I daren't think how rich he'd be if he traded with a computer instead of invested.

 

[cuttlefish]

Re: Which one do you use? Technical or fundamental analysis

I dont think FA has copped it in this thread. What has copped it is the divergence of rhetoric and practice.

ok fair call, replace my first sentence

"Although realist, the main advocator of fundamental analysis in this thread, has copped a fair bit of criticism and done a fairly inconsistent job at defending it, a fundamentals based approach will teach you a lot"

 

[wayneL]

Re: Which one do you use? Technical or fundamental analysis

Better stop soon , you could go Blind

 

[dallee]

Re: Which one do you use? Technical or fundamental analysis

Hello Realist, I did wonder whether I'd get a proverbial slap from you for posing a question in my first week of reading this forum, and there it was. I must say that I did give you a couple of clues to my beginner status. Thank you Cuttlefish for the kinder response. Is beginner lounge misnamed perhaps?

dallee

 

[wayneL]

Re: Which one do you use? Technical or fundamental analysis

If TA gives you greater returns longterm how the hell did Warren Buffet make US$60,000,000,000 doing fundamental investing, buying undervalued companies on a downtrend and holding forever?



Graham is the god of investing alright. Warren Buffet recognised thsi and begged him to teach him. Buffet improved on it ever so slightly buy holding forever and not always looking for a good discount.

What is often glossed over is the fact that Buffet is not an individual investor. He didn't make all of that money "investing". Buffett is primarily a businessman and uses OPM... whopping great gobs of OPM. He is hugely leveraged with other people assuming most of the risk.

Any individual investor who thinks they are emulating buffett.... or even graham are seriously off with the pixies.... delusional.

I think that has been adequately demonstrated here.

Cheers

 

[eddievanhalen]

Re: Which one do you use? Technical or fundamental analysis

If TA gives you greater returns longterm how the hell did Warren Buffet make US$60,000,000,000 doing fundamental investing, buying undervalued companies on a downtrend and holding forever?



.

Hope you're reading dallee

I believe we've covered this already. You can only trade so much money using TA only and , if you're good at it , you should be able to get higher returns than "investing" . Trading <$2m is not worth the trouble for Buffett but is for most of us.

Comparing Buffett with the general public is ridiculous. He formed a decent reputation amongst those close to him and then established the Buffett Partnership where his friends and family entrusted him with a fortune (for the time) and he invested it, took a nice old cut and used it to grow far faster than you or anyone else could using the same strategies. He then got to a size and influence where he could either buy businesses outright (ala Berkshire - which was actually a dog of a textile company)or , at the very least, have a direct line to management. This would again be something very few of us will ever achieve.

He then moved into insurance companies and used "the float" to further leverage his returns using OPM again.

What you need to learn is the difference between a simple downtrend for no apparent reason and buying good growing stocks that suddenly become "on sale" during a correction. You may have bought CMI right at the bottom but let's use it as an example again.

In the last 2 years CMI has moved from $2.30 to $1.30 and has been on "cheap" PER all the way down. It has a history of wildly fluctuating earnings and sells product into a highly competitive cyclical industry. If Buffett were dead he would turn in his grave at the suggestion of him investing long term in such a dog.

Ed

 

[swingstar]

Re: Which one do you use? Technical or fundamental analysis

My god, I daren't think how rich he'd be if he traded with a computer instead of invested.

My point: You're short sighted. TAs and traders ARE making three figure returns now. Many have in the past, but dare I say not as many as today with the advent of more powerful computers and the Internet. Who's to say they/we won't over the longterm?

Now I'm not discrediting FA, I'm merely making an observation.

Despite what you say, you're not learning anything from this thread, from what I've seen. You are just holding onto your beliefs no matter what anyone has to say. Picking up a decent book on trading will be more efficient use of your time.

 

[Realist]

Re: Which one do you use? Technical or fundamental analysis

What is often glossed over is the fact that Buffet is not an individual investor. He didn't make all of that money "investing". Buffett is primarily a businessman and uses OPM... whopping great gobs of OPM. He is hugely leveraged with other people assuming most of the risk.

I don't care where he got the money from. He made it value investing in near monopolies and holding forever.

Any individual investor who thinks they are emulating buffett.... or even graham are seriously off with the pixies.... delusional.

As Buffet said, and I quote verbatim from the Intelligent Investor page 548.

"You may wonder why I am writing this article. Adding many converts to the value approach will perforce narrow the spreads between price and value. I can only tell you the secret has been out for 50 years, ever since Graham and Dodd wrote 'Security Analysis' yet I've seen no trend towards value investing over the last 35 years that I've practiced it. There seems to be some perverse human characteristic that likes to make easy things difficult...There will continue to be wide discrepencies between price and value in the marketplace, and those who read their Graham and Dodd will prosper"

 

[eddievanhalen]

Re: Which one do you use? Technical or fundamental analysis

Picking up a decent book on trading will be more efficient use of your time.

Like swingstar I have no beef with FA - as I keep saying I use it as much as I do TA.

This book looks like you'd benefit from it Realist.

http://www.moneybags.com.au/default.asp?d=0&t=1&id=5113&c=0&a=74

Cheers,

Ed

 

[Nick Radge]

Re: Which one do you use? Technical or fundamental analysis

What about the mathematical side of the argument - trade frequency?

 

[Realist]

Re: Which one do you use? Technical or fundamental analysis

Like swingstar I have no beef with FA - as I keep saying I use it as much as I do TA.

This book looks like you'd benefit from it Realist.

http://www.moneybags.com.au/default.asp?d=0&t=1&id=5113&c=0&a=74

Cheers,

Ed

Exploding the Myths: What Your Broker Doesn't Know or Won't Tell You
by Frank Watkins


Hmm, Frank Watkins (whoever he is??) or Warren Buffet - tough one. Let me think about it.

 

[Realist]

Re: Which one do you use? Technical or fundamental analysis

Hello Realist, I did wonder whether I'd get a proverbial slap from you for posing a question in my first week of reading this forum, and there it was. I must say that I did give you a couple of clues to my beginner status. Thank you Cuttlefish for the kinder response. Is beginner lounge misnamed perhaps?

dallee

If you swim with sharks expect to get bitten.

Just kidding, welcome dallee - I hope you stay and join in the fun!

 

[Realist]

Re: Which one do you use? Technical or fundamental analysis

What about the mathematical side of the argument - trade frequency?

Simple, the more you trade the less you make.

 

[swingstar]

Re: Which one do you use? Technical or fundamental analysis

What about the mathematical side of the argument - trade frequency?

If you can't find many opportunities for your great system then you will have some problems. If you use discretion, then you'll probably be able to make money in any market which I hope to achieve.

 

[eddievanhalen]

Re: Which one do you use? Technical or fundamental analysis

If I didn't believe you were serious Realist I would crown you one of the most hilarious people I've ever come across.

As it is I'm not sure whether to laugh or cry.

I'm going to send every beginner trader I know to this thread and read your wisdom (whilst looking into a mirror)

Ed