Hey! You can't combine FA and TA - II

Read? Hey! You can't combine FA and TA.

What strategies does the Master Chess player good at?

 What strategies does the Master Soccer coach good at?

What strategies do they have in common?

Master Chess player and Master Soccer coach are both good at defence and attack strategies. They are less likely to depend  on one strategy to win many games. Most of the time to win many games, they have to be effective in deploying both defence and attack strategies.

Stock picking is part science (FA), part art (TA), part luck, part intuition, and always uncertain - "not precisely knowing."  (Author unknown)

FA can be thought as Defensive Strategy

In a defensive stratgey, you try to win by not Losing.

In FA, you defend your position by using strong protections such as high margin of safety, low debts, cash rich, low PE, high dividend yield etc ...

You believe that you are well protected in a foxhole staying calm and cool while waiting for good days to come. What happening outside the foxhole are irrelevant

You show no or little concerns over day-to-day stock price movement as the fundamental of a company seldom change every day.

TA can be thought as Attack Strategy

In an Attack Strategy, you try to win by Winning.

In TA, you identify your own set of winning patterns among the ever-changing patterns in the Market and attack it once you can identify it.

But you don't have much protections other than your own ability to recognize what is dangerous, what is safe what is opportunity and what is trap in the Market with whatever tools available and known to you?

Similarly, the concepts are true for retail investors who believe in income investing or profit realizing strategy. Their feeling towards falling and rising stock price can be different.


Just Dividends Only - Defence Strategy


You try to win by not Losing.

You win by collecting regular stock dividends but when stock price is falling you don't feel that you are losing as you are expecting another round of stock dividends coming soon.

When the stock price is rising, you may be happy about it but you can't really claim that you are winning yet.

Profit  Realizing - Attack Strategy

You try to win by Winning.

When the stock price rises to your profit target level, you win by realizing your profit and you begin to look forward to another round of winning.

When stock price is falling, you will soon feel that you are losing even though you haven't lost yet until you have cut losses.

Conclusion

Feeling good most of the time will fuel better investing success so I rather use both defense and attack strategy so that when stock prices are falling I won't feel that I am losing but when stock prices are rising I have won. Whenever I won, it is real money in the pocket. Shiok, right?