Value vs Quality vs Momentum
I got introduced to Technical Analysis by way of an accident during the time of the Dot Com bubble and I fell in love with it. I loved it for both the simplicity and the fact that the answers were binary in nature with very little between.
Pure Technical Analysis though is as discretionary as with any other strategy. Buy if the stock doesn’t break below 100 but if it breaks 100, expect the stock to go down to 80. Good Luck trying to invest or trade based on such analysis.
Loving the method is not enough, one needs to be a constant cheerleader for how else will the world know that my method is the best. The ability to spread the word during the early part of this century wasn’t easy – no Twitter or Whatsapp or Telegram. So, I did what I could do – started a Yahoo group and given that I still believed myself to be more of an investor than a Trader named it Technical-Investor.
While I may or may not have learnt anything from the group, I did make quite a few friends for life. In a way, my scribbles on the group were also responsible for my first real job when I got a job with Dr. C.K. Narayan. This was kind of a midwife to me for enabling me to meet “Captain Hindsight”, someone who has influenced me and continues to do so .
Technical Analysis for me still is the bedrock for understanding markets. If prices move based on Demand and Supply, it can be only gauged by data.
A reason for me sticking with it is also because of the fact that I was barely able to forecast my own businesses let alone dream of being able to forecast the business run by others.
Not for lack of trying though. I have read most of Buffett’s writing as well as have books written by many well known authors on Value Investing. While I understand the rationale, I doubt my ability to muster enough courage to bet on companies based on the understanding.
Quality is something I have grown to like with a lot of credit for it owed to Saurabh Mukherjea. While most analysts try to showcase quality by way of narrative, SM to me was the first to backtest a simple idea and showcase its ability to generate above market returns for any investor willing to invest for the long run.
To me Value, Quality and Momentum are many sides of the same coin. One cannot exist without the other. In fact, I was recently said that my returns suggested that my portfolio was more of Quality stocks and less of Momentum even though my selection criteria has nothing to do with fundamental aspects of the stock itself
Financial Advisors tell you that the risk you should take should not disturb your sleep. In many ways, the method you follow is something that you can sleep with. Every strategy has its positives and negatives. I have in the past tried to showcase the negatives of Momentum Investing for example. Same risk exits for Value / Quality or any other strategy that exits.
There are no free lunches anywhere.
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