Let’s face facts; investing is really a bet on the future, but investing is not betting. The difference between this type of bet and betting at the track is in how you arrive at your bet.
A review of the decision-making methods used in investing may help you decide which method works best for you.
Options for making you 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 facts collected through research or analysis.
Tips – a suggestion from a friend, co-worker, cousin, or uncle can come from something they heard (another tip), something they saw on TV, something they came across while surfing the internet, or just about anywhere else. The question to ask your self was the “tip” validated through research or analysis?
The Press – TV shows, internet articles & forums, magazines, and newspapers along with newsletters with ‘buy’ suggestions. Usually these source are backed by some type of research so the question then becomes: “What is the batting average of the source or the person making the recommendations?” Without knowing the batting average these recommendations may not have any more value than an ordinary tip.
Fundamental Research and Analysis – you can do this yourself or read someone else’s reports about the management of a stock or mutual fund, the industry, 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 weeks, and even months to complete.
Chart Analysis – reading charts can provide you with indications or indicators of future performance based on past performance of a symbol. There are more chart types than it is possible to list in this space. There are also free internet chart services and chart programs that are available for a fee. Some investment software programs offer just the most popular or most relevant charts so the choice becomes yours and your choice is dictated by time: the time it takes to learn a chart program can run months; and the time it takes 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 symbol or group of symbols can produce charts, spreadsheet results and/or reports based on the analysis. Chart analysis is a type of technical analysis, but a true technical analysis program goes further by allowing you to evaluate the symbols 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 investment software programs can take as little as 30 minutes a week and provide reliable safe investing recommendations.
What all this means is that investing need not be a bet. You have choices based on your preference for doing things, and you know how much time you want to spend working at making sound investment decisions.
Personally I like to use technical analysis (investment software program). It gives me an easy-to-read report coupled with key charts that can confirm buy/sell recommendations. Charts like moving average and full stochastic can be especially helpful when the markets are volatile and prices jump up and down from day-to-day or week-to-week.
Dominick is the designer of the investment program Dynamic Investor Pro, an investment software used by individual investors and professional investment advisors for stocks, ETFs or mutual funds.