In the world of commodities there are two kinds of analyses, fundamental and technical. Fundamental analysis is the more traditional approach that focuses on supply and demand figures, production estimates, consumption trends, etc... Technical analysis describes a wide variety of approaches, most of which involve charts and focus on the movement of prices. Unfortunately, what many people do not realize is that neither method has any ability to predict the future. No matter what type of data you prefer, you are always studying the past. It does not matter how big your computer is, you will never find the future in the statistics. As far as the future is concerned, there are no experts.
But wait, you say, why are some investors successful and others not? How is it that some have made big fortunes while the rest of us struggle? Didn't they have to know something about the future to have done so well? Not necessarily. I am beginning to believe that the best investors are really 'money managers' in the best sense. They are not so much great predictors as they are effective decision-makers in a dynamic world. Their focus is fixed on the present as the future unfolds, not on some past prediction. And that, I am afraid, is the essence of where many of us go wrong. We study the markets and listen to the experts. As a result, we tie our hopes and our egos to our investment decisions. When the world changes, we can't handle it. We freeze, hoping that somehow we will still be proven right (how many out there are still waiting for their tech stocks to come back?). Our resources dwindle and opportunities pass us by, all because we did not recognize the significance of a new day.
A successful investor (money manager), as I see it, has to be continually focused on the present with an awareness of maximizing opportunities. He must have absolutely no sentimental allegiance to past decisions. The never-ending job is to keep his resources positioned in assets that are performing. As the new day unfolds, he has to know what is significant. What events will make him exit and what events won't. Losing trades must not be allowed to waste his financial resources or his mental resources through worrying. In the end, his success will come from the opportunities that blossomed and the dangers he avoided, not the predictions that he made.
As investors, we have a choice. We can keep listening to the analysts and act surprised when they're wrong. We can hang on to old predictions and watch helplessly while the world changes around us. Or, we can start seeing that investing is not an exercise in predicting, but a process that requires active monitoring in a changing world. We can quit fretting about what we did and start taking responsibility for today. We can stop playing the loser's game.