Fundamental Analysis versus Technical Analysis (Part 3)

Finally, I’ve got some time to finish what I had started on this issue of Fundamental and Technical Analysis.

As I have discussed in previous entries, both FA and TA methods have their own pros and cons in the world of investing. Personally, I believe that every investor should invest some of their time and money to gain substantial knowledge about these two different strategies. A wise investor who wants success should be able to use both strategies, complimenting each other and increase the likelihood of profitable trades.

FA investors have the ability to filter and discover stable and profitable companies with the most growth potential. They also can determine the value of the business presently and in the future, as well as they possess the skills to measure the fair value of the stock price.

On the other hand, TA investors are more knowledgeable in ‘reading’ the market sentiments and predicting the trend movement of the stock. They have all the technical tools to support their analysis based on the historical records of the stock price. Even though the technical indicators are not absolute proofs that the price will go up or down, it has been proven that history does repeat itself in the stock market. 

So, I believe that investors that acquired the knowledge of either or both strategies will have bigger leverage on the market compared to average investors who only invest by following the advice of their brokers, friends or the so called ‘insiders’. This ‘herd mentality’ does not benefit the investor and will most likely cause him to suffer loss, because he will be too late to join the bandwagon while other investors are starting to sell after making their profits earlier.

By applying FA, investors will be able to decide WHAT to buy and TA investors will know HOW and WHEN to buy and sell. Thus, it will be worth it if we spend some money in acquiring some wisdom of investment before we put our money in the stock market. It is not a waste of money in educating ourselves in order to prevent even heavier losses in the stock market, because a small investment we make today will be beneficial to us tomorrow and in the future.