Top 5 of the Week of June 18
In our Top 5 this week, Michael Harris, from Price Action Lab, examines the futility of stock picking through chart analysis. A Teachable Moment’s Anthony Isola helps us remain focused on our financial plan. And A Wealth of Common Sense’s Ben Carlson discusses ‘proof of concept’.
From Behavioural Investment, Joe Wiggins debates what noise can do to your investment returns. And Writing for Real Investment Advice, Lance Roberts uncovers when the buy and hold strategy is actually hazardous to your wealth…
Leave the 80s in the Past
- There are many websites today which help investors pick stocks through chart analysis, despite the random process in use and the confirmation bias driving the suggestions
- This type of service survives through the publicity promised to the hundreds, even thousands, of analysts involved and the lucky few whose random outperformance is highlighted to attract new users
- This is a process remnant of the 80s and it’s best to steer clear of such analysts who have no connection to true stock picking analysis
Different Types of Market Hecklers
- There are many forms the market heckler can take, from prophets of doom to political partisans
- There’s also noise about weekly economic data, natural disasters which can throw everything off course short-term, and the normal market corrections too
- Whatever form it takes, don’t let them distract you from the well-constructed financial plan you have in place which will steer you right no matter what noise is going on around you
Which is the worst type of market heckler? Share your comments in the section below
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Supply and Demand
- Suppliers and retailers used to control the market through their “informational advantage,” consumers now having wide access to more variety through the internet has changed the game entirely
- The future will see consumers paying more for personal brands and the level of trust a brand or concept can deliver—the same is true of financial services
- Savvy adverts and logos will only get you so far nowadays—good business branding demonstrates proof of concept through services, communication, and execution
The Haphazardness of Noise
- A consistent impact on returns defines most behavioral biases, but noise is the only bias which is haphazard in its variability—plus, it can have a very individual effect on investment returns
- As it’s indefinable, noise makes it impossible to develop a framework that can help us anticipate and mitigate it as a bias
- You can mitigate noise slightly by accepting its existence and attemptign to develop a system of consistency when it comes to investment decision-making
Go in with Your Eyes Open
- Those who defend the buy and hold strategy have perhaps not experienced the cyclical nature of markets yet and the time it can take to get back to even
- “History, risk levels, and valuations” have a lot to teach investors who will take note and realize that a financial crisis can, and may, happen in their lifetime
- The buy and hold strategy can be too static—alternatively, active management is about compounding wealth by avoiding large losses: buying when stocks are cheap and selling defensively when not
Top 5 of the Week is a summarized collection of financial investment articles that we like and think you might like too. Having written thousands of pages of equity strategy and company research between us, we understand the allure of the ever-changing world of finance. Investing is an art form—and like everything, something you can work on and improve at. There are some excellent writers out there on the finance web, some offer a running commentary on today’s market, some are doing research, some have tips on how to Become a Better Investor, and some just lift the cloud of fog behind a lot of financial jargon. Each week we will keep you up to date with the top 5 articles worthy of your attention.
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DISCLAIMER: This content is for information purposes only. It is not intended to be investment advice. Readers should not consider statements made by the author(s) as formal recommendations and should consult their financial advisor before making any investment decisions. While the information provided is believed to be accurate, it may include errors or inaccuracies. The author(s) cannot be held liable for any actions taken as a result of reading this article. The Become a Better Investor Team doesn’t necessarily endorse any stocks or shares mentioned in the articles or the author of such articles linked to and summarized in Top 5 of the Week and cannot guarantee the accuracy of its information.