The lesson I have learnt is that there is more than one approach. And each approach works best at different times. Then is deep-value investing, growth investing, momentum investing, day-trading and whatever else works at the time.
Here is the approach extreme value investors use. This works best during a recession. They use fundamentals to the extreme. Looking for shares with high net tangible assets or high revenues. They may not be making any margins just crawling along. They sometimes buy shares that can go belly up. Often they are the only buyer (appart from the directors). But they may only put 5% of their portfolio in each share. The winners can go up 2x to 5x or more coming out of the recession. So the winners cover the losers and the approach is very stable (its hard to go broke).
Day-trading works (so they tell me) for a short period of time towards the very top of a crazy bull market. Occasional nasty shocks gradually wipe them out. And you dont hear of them for long time. Is there an element of day-trading in property investing currently? This approach is unstable (you might lose heaps).
Technical analysis tends to work best at the top of the market. So you can do well in the last half of the bull market. This approach requires trading skills. This approach is semi-stable.
Thing is most people make a religion out of their approach condemning all others. Just like the debate between property and shares. Fundamental investors think Im a chartist and most chartists think Im a value investor.
Now bringing things back to property. What would the signs of a top in investment property be? High volume with price going sideways would be the technical analysis sign. Ive heard so many times about the way property "plateaus" and then turns up. Thing is such a plateau would have decreasing volume making it a continuation pattern. A top occurs on increasing volume and then turning down trapping people at the top. The most famous plateau was observed by the economist Irving Fisher who said "Stocks appear to have reached a permanently high plateau.". He said that on 15 Oct 1929.
Mr Turkey
Here is the approach extreme value investors use. This works best during a recession. They use fundamentals to the extreme. Looking for shares with high net tangible assets or high revenues. They may not be making any margins just crawling along. They sometimes buy shares that can go belly up. Often they are the only buyer (appart from the directors). But they may only put 5% of their portfolio in each share. The winners can go up 2x to 5x or more coming out of the recession. So the winners cover the losers and the approach is very stable (its hard to go broke).
Day-trading works (so they tell me) for a short period of time towards the very top of a crazy bull market. Occasional nasty shocks gradually wipe them out. And you dont hear of them for long time. Is there an element of day-trading in property investing currently? This approach is unstable (you might lose heaps).
Technical analysis tends to work best at the top of the market. So you can do well in the last half of the bull market. This approach requires trading skills. This approach is semi-stable.
Thing is most people make a religion out of their approach condemning all others. Just like the debate between property and shares. Fundamental investors think Im a chartist and most chartists think Im a value investor.
Now bringing things back to property. What would the signs of a top in investment property be? High volume with price going sideways would be the technical analysis sign. Ive heard so many times about the way property "plateaus" and then turns up. Thing is such a plateau would have decreasing volume making it a continuation pattern. A top occurs on increasing volume and then turning down trapping people at the top. The most famous plateau was observed by the economist Irving Fisher who said "Stocks appear to have reached a permanently high plateau.". He said that on 15 Oct 1929.
Mr Turkey