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[sharechat] Technical vs fundamentals-personal experience.

From: "Bruce Harris" <>
Date: Wed, 27 Feb 2002 03:44:53 +1300

I see the debate on the investing approaches continues and so add my 
experience for what it is worth.
I had been a fundamental investor for 3-4 years up until September 2001- 
whether or not I was good at it for the purposes of the argument is only 
somewhat relevant- certainly for example among about 20 stocks largely on 
the NZ market, I had Air NZ and so concede that my judgement may have been 
far from perfect. Still that is an example of difficulties with 
fundamentals- the PE always looked good, and the price normally fell before 
the actual news became obvious so the new fundamentals still often said hold 
even though you may have lost money in the meantime.
Anyway the Air NZ saga, the Sept 11 effects, and Phaedrus' well explained 
technical arguments persuaded me to largely swap to a more technical 
approach. I would say that technical analysis is also far easier in 
hindsight than in practice, with me having dumped stocks only to see them 
bounce back up very quickly. As well it is often a challenge to determine 
which trendline if any to follow. I also have spent considerably more time 
on the process- albeit that my wife shows more interest as she I think 
understands the technical basics better, and so does some of the hard yards-
Also I concede that we have certainly not followed the technical process 
absolutely diligently and used other judgements or emotion at times, 
sometimes to our cost and sometimes to our benefit.
Nevertheless I keep as a benchmark the hypothetical case that we would have 
kept all the stocks as at Sept 22- the low point in my spreadsheet- and put 
todays prices in. These have risen by 26% from the low point. In reality on 
the technical approach, we have lifted by 27.5%- less some extra brokerage, 
to make the difference closer to 1%. Many of you could no doubt report 
better figures on either approach, but it seems to me a fair test of my own 
imperfect abilities at both, recognising that I have a day job as well.
And so, so far the difference is not significant, but we will largely carry 
on with the technical approach, backed as I think Phaedrus would say, by 
some fundamental understanding. A true test I think may come when the 
markets hit a downturn- in the last 4 months a monkey with a dartboard 
probably would have done pretty well. I do think technical analysis is 
likely to better encourage getting out of stocks earlier than fundamentals 
do, so the difference is likely to widen, but time will tell.
regards, Bruce.

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