There are religions in the investing world.  One example is the Warren Buffett religion, that preaches you should buy what you like and keep it forever.  Another is the Benjamin Graham religion, that preaches you should not buy anything until you have exhaustively studied all financial information, all public information, and maybe a little private information as well.  Another religion is Modern Portfolio Theory, which argues investment returns can be maximized while investment risks are minimized — the Holy Grail — if your portfolio is carefully diversified across many asset classes, not just many stocks.  Then, there is also the passive religion, which preaches you should just buy an index of the stock market, like the S&P 500, and then go to sleep, trusting the resilient American economy to make you healthy in the long run.

I’m attending a conference on another investing religion, called “chartism” or technical analysis, which preaches you can base your investment decisions on graphs alone.  Some adherents don’t even know the names or businesses of the stocks they buy and sell.  They simply stare into computer screens,searching for graphs that appear to relate to each other.  This seems to have some magical hold on the adherents.  After all, sunspots do impact the stock market, you know!

Like all religions, it does have some merit.  Graphically illustrating the relationship between stock market and interest rates or price-earnings ratios, for example, is quite helpful in teaching concepts but should have no magical hold over investors.

Like all religions, it also has fanatics. Deep in the confines of my suspicious mind, I sometimes wonder if chartists would even know when to use the restroom without a graph to tell them.  Frankly, I find that making decisions by looking at a chart is merely a crutch for lazy investors.