All investing is a bet on the future. The difference is how you arrive at your bet. A review of the decision making methods may help you decide which works best for you.
Options for making your investment decisions include:
• Hunches – sometimes our instincts can be rewarding, but just as often they can cost us money because a hunch is based on what we think we know and not on what is possible to know with research or analysis. Do I sound like I don’t recommend this method? You bet I don’t.
• Tips – a suggestion from a friend, co-worker, cousin or uncle can come from something they heard (another tip), something on TV, the internet or just about anywhere. The question again, is the tip validated with research or analysis?
• The Press – TV shows, internet articles & forums, magazines and newspapers along with newsletters with ‘buy’ suggestions. Usually these are backed by some type of research so the question then becomes, “What is the batting average of the source, the person making the recommendation?” Without knowing the batting average these recommendations may not have any more value than an ordinary tip.
• Fundamental Research and Analysis – you can do it yourself or read someone else’s reports about the management of a stock or fund, the industry and product trends and viability along with their financial status. Decision making based on fundamentals is primarily for long term investing because a thorough analysis can take days, weeks and even months.
• Chart Analysis – Reading charts can provide you with indications or indicators of future performance based on past performance of a ticker symbol. There are more chart types than it is possible to list in a short article. There are also free internet chart services plus chart programs that cost. Some software programs offer just the most popular or most relevant charts so the choice because yours and this choice relates to time: time to learn a chart program can be many months; and time to review charts on a regular basis can involve minutes or a full day depending upon how they are used.
• Technical Analysis – evaluating the data of a particular ticker symbol or group of symbols can produce either or both charts, spreadsheet results or reports based on the analysis. Chart analysis is a type of technical analysis but a true technical analysis program can go further by allowing you to evaluate the symbol or group data in additional ways and provide reports “in plain English” that make decision making easier. Depending upon your objectives and time frame these software programs can involve as little as 30 minutes a week and provide reliable investing recommendations.
In other words, investing need not be a bet. You have choices based on your preference for doing things and how much time you want to spend at it to make sound investment decisions.
Personally I like to use technical analysis that gives me an easy to read report coupled with key charts that can confirm recommendations. Key charts like moving average and full stochastic can be especially helpful when the markets are volatile and jumping up and down from day to day or week to week.