Investing and Trading: Beginners and Professionals

Got an interesting comment on the following posting: Peter Lynch Lyrics: Stop Listening to Professionals

Mr. kokanart said...

Mr Moola,I think this phenomenon of an Investing beginner being able to outperform a research analyst is very interesting!

Why is it so?

In no other profession does a beginner look down on a professional except in investing.

Is Fundamental & Technical analysis so useless?

If both techniques are NOT useless- then, are they so extremely difficult to master, that the majority of practitioners will fail to do their job properly - leading Lynch to urge us to "stop listening to professionals" ( completely ?).

Alternatively, is it possible that the investment experts fail because they are lazy or sloppy rather than because they lack a good grasp of their techniques?

Where specifically does the fault lie?Another point is : Are the professionals so bad?

What is the success/failure rate?

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I think this phenomenon of an Investing beginner being able to outperform a research analyst is very interesting! Why is it so?

Comments:

In my opinion, which could be flawed...

For me, a research analyst writes research report, while the investor invests. That''s all.

If you would induldge in me for a moment or two.

Let's look at the eResearh thingee offered by Bursa Malaysia. I did wrote a posting on it a couple of years ago. See posting, Research Reports Good For Stocks??

I have always challenged the monetary issue. Each company had to pay 30,000 to have their company covered by analysts! (Not sure if the fee structure is still the same! Please check!)

Here are my opinion again back then.

Charging rm30,000 simply is too much. It's insane. Think about it.

From the owner's perspective. Would you pay so much money for coverage?
From the analyst's perspective. Would you not tend to be a bit generous on your viewpoints?
From the investor perspective. With so much money involved, would the investor get an un-biased report?


And in this instance, with the monetary issue, could the research analysis perform better than the beginner Investor?

This is a complex question to answer. On one hand, yes, the beginner could screw up badly by making some rather poor stock selection.

However, if you ask me, if the beginner does the homework and make some simple sound reasoning, I do agree that it's possible that the investor could perform much much better since the investor has no obligations and they should be able to make a much better investment since their own reasoning should be pretty much unbiased.

But unfortunately as in real life, they are but no guarantees.

Sometimes, investors are rather biased in their own judgement, where their eyes tend to only see what they want to see. And many a times, investors tend to be in denial mode and refuse to see the short comings in their own stock selections.

==>> In no other profession does a beginner look down on a professional except in investing.

Comments:

It's not really the same. For me, the investor invest while the analyst writes analyst reports.

==>> Is Fundamental & Technical analysis so useless? If both techniques are NOT useless- then, are they so extremely difficult to master, that the majority of practitioners will fail to do their job properly - leading Lynch to urge us to "stop listening to professionals" ( completely ?).

Comments:

That's a massive statement to make.

Frankly, no I do not think either analysis is useless.

And from my experience, I have noted that many a times it's not the analaysis that is at fault. Most of the time I do note that the user's own judgement and interpretation of the situation is at fault.

And do understand that the series of Peter Lynch Lyrcis focuses on Peter's ideology on the markets. We all will have our own certain investing styles, trading techniques. And as long as we do understand why our methods work and as long as we do master what we do best, then why change?


==> Alternatively, is it possible that the investment experts fail because they are lazy or sloppy rather than because they lack a good grasp of their techniques?
Where specifically does the fault lie?
Another point is : Are the professionals so bad?What is the success/failure rate?


Comments:

I shall leave these questions open for all. If anyone have any differing viewpoints, I do invite you all to come forth and share your views!

Cheers