The Game of Investing, Vol. 14
We’re peeling back the curtain on one of the most important spectrums of investing to help answer the question: “What type of investor are you?”
Our expert today is Jamie McDonald, former hedge fund trader and host of this Investor Masterclass.
- “There’s no shortage of ways to make money in the market,” says Jamie. “But whether you’re a technical trader or a fundamental investor, there are some universal truths.”
In this issue, we’ll cover 3 things:
- The value of experience and discovering what works for you
- Fundamental analysis — how it works and why it’s successful
- Technical analysis — charting the course to market returns
Welcome to the Game
Welcome to The Game of Investing, a bi-weekly newsletter bringing you “aha” moments and actionable lessons from Real Vision experts. No matter your level of expertise, markets are tough — which is why we all have to put in the work. Ultimately, the game of investing is a competition with yourself. Our mission is to help you navigate the path to success. Prepare to level up.
Let’s get started.
LEVEL 1 — The Voyage of Discovery
The best way to really learn the markets is to be in the markets. Experience is the key to understanding your own investment goals, risk tolerance, trading styles, and time horizons.
The famed investor Jim O’Shaughnessy once famously said on Real Vision that you learn more from being short one futures contract than you do from an MBA.
- “That might seem a little hyperbolic, but there’s truth to it,” says Jamie. “Now, you can’t teach experience, but we can sure as hell learn from it.”
For many beginner investors, experience comes by trading a simulated account. Then, when ready, start investing real dollars while keeping your decisions and emotions in check.
🔑 The takeaway: Journal all your trades and how you feel along the way. Was there a point where you became uncomfortable? Did you exit the trade, or grit your teeth and carry on? These are questions we have to answer in the quest to learn which style of investing fits us best.
LEVEL 2 — Fundamental Analysis
Fundamental analysis is commonly used in evaluating individual stocks and bonds. It focuses on exactly what you’d think — the fundamentals of a company — so investors can determine the intrinsic value of an asset relative to market price.
- Value investing, which we covered in our last issue, is heavily predicated on fundamental analysis.
This type of analysis considers a wide range of factors like financial statements, economic indicators, industry trends, management history, and macro conditions.
“Fundamental analysis focuses on capturing long-term trends,” says Jamie. “It requires extreme patience and is suited for investors who enjoy digging through reports and discovering overlooked opportunities.”
Warren Buffett, Bill Miller, and Benjamin Graham are famous fundamental investors.
Andreas Steno Larsen is one of Real Vision’s most popular contributors. Our members are huge fans of his weekly report. If you’d like access to Andreas’ independent research, there’s a 40% discount exclusively for the Real Vision community.
LEVEL 3 — Technical Analysis
Technical analysis concentrates on the historical price and volume of an asset to identify tradeable patterns and statistical indicators.
- They focus heavily on charting support and resistance levels and identifying market momentum.
This approach is commonly used to time investment decisions — whether short- or long-term — so it’s popular with short-term traders.
- No matter your time horizon, consistent risk management is key for technical-based trading.
Technical analysis often attracts traders with a keen mind for math and those who enjoy operating within a repeatable system.
- Jack Schwager, Tom DeMark, and Peter Brandt are famous technical traders.
🔑 The takeaway: Many investors use a combination of both fundamentals and technical analysis. Often, one approach supports an idea born from the other. Understanding these 2 building blocks will make you a more complete investor.
Thanks for reading. In our next issue, we’ll look at another branch of the investing spectrum: systematic vs discretionary trading.
See you then.
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