Quick Wife Update: My wonderful wife just had a birthday! Happy Birthday, Sweetheart!
She is about 1 ½ years removed from her breast cancer diagnosis. After four surgeries last year, she is still regaining her strength. She is getting better each day but it is an agonizingly slow process. Thank you for everyone’s continued well wishes.
Stock Picking Systems
I am often astounded at how many people have “bought in” to the idea that day-trading stocks can work for anyone that has the time and intelligence.
I often hear, “I was doing pretty well picking stocks, but it was just too much work. I had to constantly stay on top of things. I just don’t have the time.”
And there are PLENTY of people more than willing to sell you their fool-proof stock-picking system. Here’s one:
$7000?! Well, I guess if you want to have a roadmap to being a millionaire, that’s just what it costs. You have to spend money to make money, right?
Today I am going to review a very common stock picking strategy called “Charting” or “Technical Analysis.”
Technical Analysis consists of looking at patterns in market data to identify trends or make predictions. If you watch enough CNBC, you will see this strategy being used by many of the Super Smart Guys they interview.
Here is an example of a chart they might use:
Hmmmm….. looks sophisticated.
Here’s another one:
Anything that looks this complicated HAS to be important, right?!
Take a look at this picture from another stock picking site:
Those guys have TWELVE computer screens. TWELVE! How could someone with only ONE computer screen possibly compete?! I only have TWO screens in my office….
But there is one teensy-weensy problem with all of these theories: a total lack of evidence that it actually works.
“An October 2009 study by New Zealand’s Massey University tested more than 5,000 technical analysis strategies in 49 different countries. The result? Not one strategy generated returns that aren’t predicted by chance. Let me repeat that. Not one.”
-Anand Chokkavelu, CFA
Or put another way,
“A monkey pointing at random stocks in the Wall St. journal will experience as much stock picking success as someone using technical analysis.” -Dave
Warren Buffett has his own take on it as well: “I realized technical analysis didn’t work when I turned the charts upside down and didn’t get a different answer.”
Ouch.
“Ok, Dave. So all this stuff I hear about ‘stock picking systems’ are a bunch of malarkey. What’s the big deal?”
The big deal is that A LOT of people believe this stuff.
There are too many people across this country pegging their retirement hopes and dreams on stock picking systems that don’t work.
So, if you see something like this on your computer screen…
Or this…
Don’t click on it!
But I have great news! Utilizing a balanced and diversified portfolio of stocks and bonds, while keeping a long-term, disciplined focus, is an incredibly powerful and time-tested way to keep your money working for you. Don’t make this more complicated than it is!
Be Blessed,
Dave
Note: Many of you are still calling us on our old phone number. Please take note that our new number is: 941-556-6307. The old phone number will be disconnected in the near future.
