Human behavior and invest

Self-destructiveness is such a pervasive human trait because civilization is builton controlling aggression. As we grow up, we are trained to control aggressionagainst others - behave, do not push, be nice. Our aggression has togo somewhere, and many turn it against themselves, the only unprotected target. We turn our anger inward and learn to sabotage ourselves. Little wonder so many of us grow up fearful, inhibited, and shy. (From come into my trading room)

Stock Invest IS A GAME OF PROBABILITY. In addition, it is difficult to judge whether the return is contributed by the luck or skill? Fata and Franch have conducted a research and concluded that most of the hedge fund is zero alpha return and most of the return cannot be explained by the skill. However, in my opinion, the limitation of this result is the timeframe for conducting the research. It did not show what timeframe has been used to conduct the research. During the short time horizon, there could be a lot of noise in the market. Even the fund manager does have the skill, it is impossible to have a favorable return. 

luck -good luck- bad 

Skill bad +$ -$ 

Skill good +$ & skill +skill

According to the research conducted by ---. retailer investors are advised to focus on process rather than outcome. (SEE table above ) 

The worst case scenario is u will gain skill even you have the bad luck. By saying process, it means that investors should go and conduct research about the company via fundamental or technical or approach to the management. But the fundamental do have some disadvantages.

- how do you know the info from report is correct. After all, different company use different accounting standard (GAAP or IASB) and it could be a fraud which happens a lot of times in the history- inflated revenue, dishonesty of management and blah blah blah

- Second, how do you interpret the info? Do you have the right or suitable model for the data to plug in to calculate the value? For instance, Discounted cash flow is only suitable for a company that has steady cash flow such as REIT, dividend company. Furthermore, some financial ratio is not suitable for some industry such as Return on an asset is not suitable for a technology company in which they rely on innovation, not a machine to produce income.

- Lastly, there is some random event could affect the company such as natural disaster, management suddenly resign or death of the CEO BLABLBLA

Technical analysis is a method which use graph the interpret the sentiments of stocks. However, it is easy to manipulate for some penny stocks that hold by few shareholders. 

Furthermore, if many investors use the same indicators such as buy if RSI reaches 50 and sell it if reach the certain level which could eventually lead to self-destructive because there might be someone who does the reverse things or tries to anticipate others movement.

fundamental - 33% / 3 

technical - 50%