These 2 guys could hardly be more different. They disagree on nearly everything. They both appear to be rational, sane, reasonably intelligent people - so how come their investment views are so diametrically opposed? This post is an attempt to find underlying reasons that might help us understand how two such totally different investment styles came about. It is NOT an attempt to prove one approach "right" and the other "wrong". A possible explanation for such fundamental differences is presented.
Snoopy’s posts document his fundamental approach to investing. They emphasize the long-term and usually advocate buying and/or holding specific stocks. Posts advocating selling are rare. He places a very heavy emphasis on dividends. He cares little about general market sentiment and appears to be unconcerned by large drops in the shareprice of stocks that he holds. He has no exit strategy and tells us that he has a 'buy and buy'(rather than ‘buy and hold’)approach. The longer a share continues to underperform, the better it looks to Snoopy - which is why he keeps buying. He can watch a stock he holds halve in value and not turn a hair. His aim is to beat the bank rate.
Phaedrus places heavy emphasis on market sentiment. While he seeks dividend income, he regards capital gain as being more important. He makes strenuous efforts to time entries/exits and limit losses, using an array of technical indicators in an attempt to maximise his investment returns. He avoids underperforming shares, prefering to invest in those that are in uptrends, which he holds only so long as the uptrend continues. Having been badly hurt by market reversals in the past, he is now acutely conscious of the need to closely monitor the market in general and trends in particular. His aim is to beat the Index.
[u]Discussion</u>. We can see from the LPC chart posted by Snoopy on 13/5/06 that he is a surprisingly active buyer. For example, with TEL alone, since his initial purchase, Snoopy has added to his holdings at least nine times. Snoopy tells us that he does not like holding cash, which he sees as risky. Since there is no evidence of any selling, we are forced therefore to conclude that most if not all of this heavy buying activity is funded from income. Snoopy appears to have a fairly regular, fairly substantial income. I suspect that he is also a superannuant.
Phaedrus tells us that his entire income is solely from dividends and capital gains, and that he is too young to get the pension. Could this be the core fundamental reason that lies behind the two very different attitudes? Phaedrus is very tightly focussed on profits because he has to be - they constitute his only income. With a separate income stream, Snoopy perhaps feels that he need not worry about losses. So he doesn’t.