I'm Absolutely Positive

Too Critical?
I know I sound critical of the financial services industry.  I've worked in the industry, I've watched it for years.  I've been there, done that, and got the T-shirt.  It is my personal experiences with the financial services industry that prevents me from believing their propaganda and the many cheerleaders who endorse their message (and receive compensation for doing so).  While critical of the financial services industry, I'm also very positive about our own ability, with the available technology today, to better the results of the average fund manager.  Remember, very few of them beat the market averages over the long term.

Tactics
I know people have difficulty believing they deserve better.  After all, the professionals are the best at doing what they do and I'm not disputing that.  That means, either I can settle for the bread crumbs they throw my way, or I can look for something better.  If we are trying for a different result, why would we try to mimic the professionals with their millions and billions of dollars for which they earn outlandish fees?  You and I have so much less.  I remain convinced that our primary advantage over the big professional fund managers is our ability to out-run them. That means being very tactical.  The philosophy of fund managers has always been to buy and hold.  I have said in this blog, and I've said for years, that buy-and-hold is a marketing strategy, not an investing strategy.

Trends
So, if we want to outperform buy-and-hold and run rings around these professional fund managers then how do we do it?   Many would tell me they don't have all day, every day, to sit in front of their computer watching markets, and playing with the numbers while trying to do better, especially when they don't even believe that timing the market is possible.  And that's fine.  People who don't believe it is possible will never be able to make it happen, anyway.  Faith is funny that way.  To outperform the average fund manager, people don't have to write a blog, they don't have to surf the internet every day, they don't have to crunch the numbers all the time.  We simply need to monitor trends; long or short, up or down.  I get confused as to why that is so hard to understand.  Just me?  I don't know.  Like I said, I don't understand why.

Profit
I'm not even saying we need to identify the very beginning of a trend.  Once the market confirms there is, in fact, a trend, then we can take part, and get out again when either the trend seems to be faltering, or when our profits are sufficient that we should take our money off the table.  Even if we get it right only fifty percent of the time, but cut our losses short, we still come out ahead.  So what if we can't identify how long the trend will actually continue?  I guarantee, another new one will shortly follow.

Charts
It doesn't take a huge amount of skill to read a chart.  People do it all the time.  We look at charts of the outdoor temperature, performance charts, health charts, progress charts, budgets, forecasts, to name a few.   Yes, it takes a little practice, it takes knowing what to look for and what to watch out for. In the end, anybody can do it, anybody who wants to, and has a little desire to spend a bit of time monitoring their investments in return for a greater than average payoff.  Again, I have to admit I don't know why more people don't take this approach.  I do know it's partly because people think it's too hard, and that it is a waste of time, especially since we are always told by the professionals we couldn't do it even if we tried, anyway.

Full Time Returns; Part Time Effort
As for me, I'm not giving up.  I will continue to blog.  I will continue to talk about the methods in which people can take control of their own destiny through just a little bit of time and a little bit of effort in order to make more money working part-time than any other part-time job would ever pay them, and even more than some full-time jobs.  It takes practice.  I'll grant the critics that, but it's neither too difficult, nor too time-consuming - let alone impossible - that most people shouldn't, at least, try.

What is your single biggest reason for not trying?  Care to share it?

Fundamental AND Technical Analysis

Tools of The Trade
Orienteering is a sport that requires competitors to find flags hidden outdoors by using a map and a compass to navigate a course. The map shows the contours of the terrain, and uses different colours to illustrate the type of ground cover - trees, clearings, water.  The compass is used to orient the map and to guide the competitor in a particular direction. Close to the flag, the use of the map is crucial in pinpointing its whereabouts. The course could be navigated with only the map or the compass, but it would usually take longer because it is much easier to make navigational errors when not using both.

Fundamentals or Technicals?
When I hear advisors who say they rely on the fundamentals and others who say they rely on the technicals, I often think of orienteering. Why would they want to rely on only one, or the other, when both are available to them? I suppose we have all heard the expression, "Jack of all trades; master of none," but we don't need university degrees in either area to use them effectively. We don't need to know every last detail. I think we can all agree that knowing how many pennies the CEO has in her purse, is detailed, but useless information. Likewise, knowing the number of years in a row a stock has made an uptrend in the month of September is, for the most part, of little value.

Done properly, fundamental analysis tells us what we can reasonably expect to pay for a share in any company. Likewise, technical analysis can tell us whether we are close to the beginning, or the end, of any trend in the price. Armed with that information, alone, we can make intelligent decisions about what to buy and when to buy it.

Why Not Both?
I continue to hear the talking heads proclaim they are a fundamental, or a technical sort of person - and proud of it. I understand the two types of analysis represent a different approach and mindset. They are two different ways of looking at companies. That is the strength of using both types of analysis. If they both confirm a buy decision, then great. If not, then why risk it? Would you recommend a dentist who only uses half of their tools? Imagine your dentist saying, "I don't do x-rays because I don't find them very helpful!"

The problem is the two approaches are seen as either/or instead of both/and. The fundamentalists cast dispersions on the techies claiming how much more thorough their analysis is. The technical analysts claim the fundies are not even necessary. Yet, it is not the type of analysis, which is important, but the information that each yields about any potential investment. Unless, of course, we assume there is no use trying to buy at a low price because we are almost never going to sell, anyway.

The Bottom Line
So there is the rub. Why give credence to any tool that flies in the face of the sacrosanct buy-and-hold marketing strategy? Funny thing is, I'm willing to bet that most fund managers actually pay attention to moving averages and other technical signals. It would likely have a negative affect on returns if they didn't. Doesn't it go to follow, then, that the very existence of technical analysis would dispute the notion that it is impossible to time the markets? Unless, of course, technical analysis is just a lot of creative imagination.

What do you think? Which is for real, technical analysis, or buy-and-hold?