This book is not intended to tell you which individual stocks to buy or sell, but more importantly to suggest some key rules and insights that comprise an investment approach and philosophy which you, the investor, can use for the rest of your investment lifetime. In fact, some of your very own life experiences should come in handy when considering a potential course of investment action. That’s why I chose the title Relationship Investing. By using life experience as the common denominator, I believe that I can assist in simplifying the process of making difficult investment decisions while simultaneously relating to the largest possible pool of investors. Hopefully, you’ll be able to achieve potentially improved investment results while better addressing market risk. Remember, the stock market is both judge and jury, and its verdict is final. Like it or not. Period!
The Greatest Analyst of All
Let me come right out and say it loudly and clearly. The greatest expert on the stock market is not an economist or a professor or a mathematician. It’s not a securities analyst or a fund manager or an engineer. The greatest analyst of all is the stock market itself, and it pays to heed its movements and its message. As a technical analyst (also known as a market technician), my job is to serve as a stock market translator, so to speak. I try to decipher the market’s message by studying a variety of price graphs and other investment gauges to determine whether money is flowing into or out of the shares or indices or markets in question, whether it be on a shorter-term or longer-term basis. I’m basically taking the markets’ supply-demand pulse, and the tools of my trade function like a doctor’s stethoscope, listening for an internal rhythm.
Since the 1970s, a pen and paper have been two of my primary tools, as I prefer to personally write down market data on both a daily closing and weekly closing basis. I spend ten minutes or so on the former each morning, and around fifteen minutes on the latter over the weekend. I also jot down a few monthly closing figures, which takes even less time. In an age where technology rules, I like keeping this tradition I learned as a kid. It immerses me in that analytical moment. The lion’s share of my time, however, is spent utilizing the wonderful computer graphics and technical market studies available today.
When it comes to believing the verdict of either the stock market or an individual (no matter how brilliant that person is) in assessing an investment trend, I’ll always side with the former. How you decipher the market’s message is up to you, but I’ll tell you this: you cannot successfully invest in the stock market on the “long” (buy) side during a primary downtrend, just as you cannot afford to be left behind during a primary market upswing. It was Charles Dow who identified three trends among the market indices and compared them to the ripples (shorter term), waves (medium term), and tide of the ocean. The last was compared to the long-term trend, which you cannot swim (or invest) against. And so it is with the stock market.
