The most convincing reason I need to employ fundamental analysis over technical analysis is offered by the real world success of Warren Buffett. This old article from Fortune explains it all.
He got his first books on the market when he was 8, bought his first stock (Cities Service preferred) at 11, and went on to experiment with all manner of trading methodologies. He was a teenage stock ''chartist'' for a while, and later a market timer.
(snip)
(I)n early 1950, while a senior, he read Benjamin Graham's newly published book, The Intelligent Investor. The book encouraged the reader to pay attention to the intrinsic value of companies and to invest with a ''margin of safety,'' and to Buffett it all made enormous sense.
Warren Buffett did not become the world's greatest investor by overlaying moving averages on top of stochastic oscillators in a point-and-figure chart. He did it by researching the hell out of quality businesses that he understood and sticking with them through good times and bad times.
Unfortunately some people swear by charts to make money. I like these people, because their irrationality and frequent trading eventually lead to the mispricing of quality companies. Give me that volatility-induced discount to intrinsic value, active traders! Come on, I know you want to pull that trigger. I'll be patient while you wait for that Fibonacci retracement. It makes it that much easier for me to make money in the long haul.
Why bring this up now, with all the fun financial activity hitting the wires lately? Because I've covered a lot of those topics already. Because I'd have to debunk technical analysis anyway at some point. Because I don't like doing stupid things with my money. And because it's my blog, and write about what I feel like covering.
