Financial Questions?

[Securitized]

Alpha and beta, like technical analysis in its totality, is useless "magic" over the long term. It uses previous prices to try to predict future prices, which it does correctly about 50% of the time. Technical analysis is basically rubbish when used by itself but it provides a great distraction for the middle class who dream of becoming rich someday and it's wonderful for brokerage firms who collect all those commissions from frequent trading done by college educated white collar retail investors who are too smart for their own good. Smart people make some of the worst investors because they think they "should" already know how to invest just because they're so educated and intelligent. For instance, Sir Isaac Newton lost a fortune in the stock market.

If you flip a coin, calling heads as up and tails as down, and you plot the ups and downs on a chart, the chart will look like a typical stock chart. Fundamental analysis is the only real way to win out over the long term.

Warren Buffett and Peter Lynch didn't use technical analysis to make their fortunes. In fact, I can't think of a single legendary stock investor who used technical analysis as their primary approach.

Those books (Intelligent Investor and Random Walk...) are good but they are only a piece of the overall puzzle. Actually, it's an insult to Benjamin Graham to put Random Walk in the same category. I reject efficiency theory though, which is what Random Walk preaches. Basically, it says that there are no stocks priced incorrectly and that all stock prices take into account all knowable information. Intelligent Investor says that stocks should be purchased below their intrinsic value. Intelligent Investor and Random Walk essentially contradict each other because according to Random Walk, all stocks would be priced correctly.