Investing Guide

Today was a good day to own stocks. The market has been down going down a lot more than it is going up. All I know is that I cannot predict the market’s short term volatility. I feel it is too random. I just buy stocks with good fundamentals and wait for them to recover. If they do not recover and it is the end of the world, then my portfolio value would not matter anyways. I try to only buy quality companies.

People who think they can predict the market are just fooling themselves. I do believe in the weak form efficient market hypothesis which states that all stock prices fully reflect historical price and volume data.

This is why I do not use technical analysis. I think chartists may be successful in the short run, but are ultimately wasting their time trying to interpret various patterns they see. I think trying to interpret data from a chart is too subjective. Many various patterns will form, but does that even mean anything? With new data coming in all the time, a pattern will be found if they look hard enough. Can the past really predict the future? With so many variables that cause the movement of a security, will something simple rule used in technical analysis work?
I do not believe in momentum rules since I buy stocks when they are down at least 20% off their 52 week high. I like Benjamin Graham’s quote from the Intelligent Investor which says:

“The one principal that applies to nearly all these so-called “technical approaches” is that one should buy because a stock or the market has gone up and one should sell because it has declined. This is the exact opposite of sound business sense everywhere else, and it is most unlikely that it can lead to lasting success in Wall Street. In our own stock-market experience and observation, extending over 50 years, we have not known a single person who has consistently or lastingly made money by thus “following the market.” We do not hesitate to declare that this approach is as fallacious as it is popular.”

I do not like technical analysis because I think it is a waste of time.

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