I certainly agree there are many successful approaches to investing. And I even concede that charting might be valuable in certain circumstances, see below. The issue for me is when should any stated approach be allowed to contend with proven approaches when there is serious doubt about its viability? For example, suppose you met someone who claimed to make money playing craps in Las Vegas. He played five times, winning 4 times. Moreover he would have won the fifth time too, but he bet against the momentum at the table (he didn’t follow his own rules). What do you tell that person? I tell him his system is seriously flawed and in the long run he will lose.
The reason I like small stocks is because they outperform the market over extended periods of time, just desserts for their greater volatility. That is comforting, but only somewhat because for about half of all five-year periods they fail to overachieve. The real reason I like small stocks is because I believe the market is not efficient pricing small stocks, which for all practical purposes it is for large stocks. This means that charting does not work with large stocks (at least when taking transaction costs into account), and the best short-term future estimates are current prices. Neither does fundamental analysis work (hence your experience with MU). Analysts only serve to help keep the large stock market efficient, not help their customers find opportunities for extra profits. To me, the evidence for this is overwhelming: fund managers cannot beat the market enough to pay for their fees; many academic studies; and my own experiences trying to find favorable option prices. Occasionally, there are periods when the whole market, or sector, gets carried away with itself and goes to excess, but these times are only determinable on a consistent basis after the fact. When Hillory berated the health industry, the astute investor bought HMO stocks. Latter it turned out that drug companies should have been bought also, but this was not clear at the time.
Small stocks often are under- or over-appreciated. This shows up strongest in their fundamentals, but it probably can show up technically as well - and this is where I think you can make extra profits in charting.
Are you showing your true colors when you said you invest conservatively with your IRA (cannot fail) nest egg, and use charting only for speculation? I have all my stock investment accounts in stocks like WIND and SNIC, but I am trying not to speculate at all. In fact, I believe Warren Buffets stock picks are riskier than WIND. Most of my stocks have much more upside potential than his, with less down-side risk. |
