Investing School of Thoughts

There's a saying, "Tactic wins the battle, strategy wins the war"

To win the investment war, you need to strategize your investment approach. Else, you will have high chance of losing the money. There are 3 popular school of thoughts in investing strategy. There are many more but I just want to highlight 3 strategy that commonly used and successfully generate return as well. The three strategies are

1. Fundamental Analysis Strategy

Fundamentalist will look at the business fundamental, looking at quantitative value at  a report (Ratios, Financial reports like Balance sheet, Cash flow statement, Profit and loss etc) as well as qualitative characteristics of a business - moat, durability, management, business prospects etc.). The fundamentalist will try to buy and hold a stock as long as they can. the buy call will be triggered when a value of a stock is extremely undervalued using margin of safety valuation. The sell call will be executed if the business fundamental is deteriorated like increase of debt, consecutive losses, bankrupt, no durability. Best example in trendy and hot product like Polaroid Camera (now that it is being obsolete in the market), Nokia Handphone use to become market leader in 2000's, now being cannibalized when Apple and Samsung introduced smart phone.

Fundamental vs Technical

2. Technical Analysis Strategy

This strategy will only look at price and volume action. believe that the historical performance of stocks and markets are indications of future performance. This can be tracked using chart and graph. The technical analyst tend timing to buy entry and sell exit based on pattern of price and volume. They sometimes don't call themselves as investors but known as traders or chartists. Sample chart below is MYEG (Company listed in Bursa Malaysia who provides E-Government Services), the arrows are the trigger of buy and sell call. It is not holy grail as they said. Profitability of you being correct is 60-70%.

MYEG stock from the perspective of Technical Analyst

3. Hybrid of Both Strategies

The hybrid of both will only select strong fundamental companies to be traded when there's a buy or sell signal using price and volume action based on historical performance of chart pattern. Some said the hybrid can’t mix as both are opposed to each other like oil and water. The hybrid uses most important reports and ratios like Profit & Loss (earning report), P/E (Price Earning Ratio). Mostly, the hybrid will not try to keep a stock for a long term. Most popular strategy that people talk a lot is CANSLIM Method invented by William O' Neil (Will discuss separately on this in different topics).

Which one should be your choice?

Which one fits your investment objective, time frame, your psychological mind, your full time job etc. Both can be right or wrong. If you think you can consistently make money with either strategies; stick to it, be discipline, have perseverance, patience and may the success be always be with you.

My take (personal bias): is the one who stay in the market the longest and become successful of all time like Warren Buffett, John Neff, Benjamin Graham, Philip Fisher, Peter Lynch, John Templeton (just t0 name a few). Of course, some successful trader like Dan Zanger,  Richard Dennis, William Eckhardt etc. The question is who can sustain longer in the market and becoming more richer. If you look at the Forbes top billionaire, who are they?