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

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

Read? Fundamental or Technical Analysis? - Revisit 3

By now, you may know that I am NOT a big fan on either FA or TA. But, I believe that FA or TA is just part of the process of stock analysis. There is no need to go to the extreme of either techniques to be equally effective in making good returns on investment. Stock analysis is how we begin our investing journey and not the destination. FA and TA can play complementary role to each other and they are not mutually exclusive as most of the time our brains can handle conflicting views and reconcile them to arrive at more moderate views.

Read? Help me! I am still losing money in my Investment Quadrant - Part 1

Read? Time: The Most Precious and Fairest Commodity Of All

Why I am not a big fan of in-depth FA?

Because of Time. Yes, it requires too much time to do it well.

"Time is the most precious and fairest commodity of all. Kings or Peasants and everybody has the same amount of time, no more or no less. 24 hours a day" - Createwealth8888


In-depth fundamental analysis of a company business will require us to put in plenty of time, effort and energy to do it well especially when we still have full-time job. Some of us may even sacrifice their annual leaves to attend companies' AGM to get close to  the Management to ask a few questions here and there to clarify their doubts and to increase their understanding of company businesses and future plans and thinking that their attendance at AGMs may arm them with edges over others who are not doing it.

BTW, do we see institution investors at AGM? No, right! It is quite obvious that AGM is the not right venue to grill the Management.

As employees the number of annual leaves are limited; but some of us may instead of using their annual leaves to spend more time with family and especially young kids, they trade off their most precious and fairest commodity of all - time and spend it with the company's Management who are there at AGM during their official working hours.

Make no mistake about it. We definitely need to spend enough time, effort and energy on our investment to get better returns. But since I am not willing to spend too much time on FA, then I will need other way to make it up. I find that TA is a good mean to complement this lacking in FA to complete this stock analysis process and get the job done.

TA can help to complement the lack of in-depth fundamental analysis.

The whole market and stock sentiment is shown in the chart and don't under-estimate its usefulness. It does serve a definite and useful purpose. Thing that is useless to human being will soon be obsolete. Can you still recall those things are useful in your childhood days but they are not around now as they become useless?

Market is full of smart investors and money managers

Market is never short of full-time analysts assisting their portfolio managers to filter out good stocks. Market is also never short of full-time smart money mangers such hedge funds, private and institutional investors looking for better returns for their investment. When they uncover them, they waste no time and will jump into them without further delay. All these traces of buying and selling activities from the big boys will be captured in the chart. There is no way for the big boys to hide their footprints.

The recent price and volume surge in Informatics is a good example how Peter Lim and by his tons of followers drove this stock crazy and provide huge returns for its early investors.

The nice thing about TA is that it requires so much less time and effort to do stock analysis once you are experience enough to do it. A skillful chart reader can easily analyse the stock chart patterns for a buy, sell or hold decision in less than 5 mins per chart. It is possible to read many charts in one hour. How many companies can you analyse using FA in one hour?

Less but not More

When we become more and more experience and more and more savvy in investment, we should aim to reduce the amount of time, effort and energy required for stock analysis instead of spending more and more time into our stock analysis and then trade off the most precious and fairest commodity of time for other equally important thing in life especially for those with young family.

Unlike senior citizens or retirees who have plenty of spare time to attend AGMs for free makans or when there are no AGMs some of them may spend many hours at the beach grazing sea-waves or fishing where obviously they know there are so few fishes to be caught.

Diversify and Control the Risk

In addition, I mitigate the risk of picking up wrong companies due to lack of in-depth fundamental analysis by diversifying into more companies e.g. 20-25 counters in different sectors so that I could still afford  a few "bad" companies in my portfolio going bankrupt without any serious financial damage to the portfolio.

BTW, the top 20 blue chips with good dividend yield in STI rarely go bankrupt. So don't worry too much if someone happened to ask you as I can't recall any since the last two great STI bears. When the company doesn't go bankrupt sooner or later, its price may catch up or you wait long enough to collect dividends similarly you will get back your capital.