Saturday, January 5, 2008

Other things I learned in college...

that later proved to be wrong!

Myth #1: "Fundamental Analysis and Technical Analysis are mutually exclusive approaches to investing and trading."

What I've found: William O'Neil's classic, "How to Make Money in Stocks" shows that Fundamental and Technical Analysis can be used together to indentify likely stock market winners. Some call this hybrid approach "Techno-Fundamentalism."

Myth #2: "Market timing is a fool's game... You can't use market timing strategies to enhance risk adjusted returns."

What I've found: Patterns in human behavior repeatedly drive stock market cycles, which can be exploited to enhance risk adjusted returns over time.

Myth #3: "Beta = Volatility = Risk = Bad"

What I've found: Some types of volatility are good, for example when a stock you own explodes to the upside! The challenge is to harness the volatility and retain your trading gains over a complete market cycle. e.g. peak-to-peak or trough-to-trough measurement.

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