I have quite an interest in investing in the stock market.  However I’ve noticed a huge uprising in day trading lately, with more and more books appearing on the subject, and many websites offering supposed “tips”, for a fee, of course.

Now I believe 100% in the value investment strategy that Warren Buffett helped develop alongside Benjamin Graham, and I have serious doubts over the long-term profitability of day trading, since it is actually completely removed from the fundamentals of the underlying business.  What they essentially do is try to predict other people’s reactions (that is, their buy or sell calls) on the very short term.  That is exactly what people do who make short term predictions over a stock’s price movement.  On the other hand, fundamental analysis looks much more closely at the business’ value, in terms of assets, cash generation capabilities and even brand value (for example, if you were to give me $1 trillion, and asked me to take market share away from Coke, I couldn’t do it.)  Although the stock market does not immediatly realise the value of the fundamentals of the business, it always does over time, as is proved by Warren Buffet’s track record.  His historical annual average compounding rate of return is 23%, over the last 30 odd years.  He is also the richest man alive, and made his money entirely with stocks.  I have yet to see any day trader come close to his achievements.

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