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This chapter is about a vital expectation for successful investing: an accurate estimate of intrinsic value. Warren Buffett says that the best investment course would teach just two things well: how to value an investment and how to think about market price movements. All approaches to investing in company securities can be divided into two basic types: those based on analysis of the company’s attributes, known as “fundamentals,” and those based on study of the price behavior of the securities themselves. This chapter explains what technical analysis is and proceeds by describing momentum investing. It also considers two principal schools of investing, both driven by fundamentals: value investing and growth investing. In particular, it highlights value investing’s potential to consistently produce favorable results. The chapter includes comments and insights from four renowned investors and investment educators.

This chapter considers another important need for successful investing: an accurate estimate of a security's intrinsic value. All approaches to investing in company securities can be divided into two basic types: those based on analysis of the company's attributes, known as “fundamentals,” and those based on study of the price behavior of the securities themselves. In other words, an investor has two basic choices: gauge the security's underlying intrinsic value and buy or sell when the price diverges from it, or base decisions purely on expectations regarding future price movements. This chapter first discusses technical analysis and momentum investing before turning to value investing and growth investing. In particular, it explains the difference between value investors and growth investors. It also highlights the potential of value investing to consistently produce favorable results.

Are behavioral biases prevalent in commodities and futures markets? Although retail equity investors display many psychological biases, investors who are more sophisticated exhibit fewer biases. The market makers, traders (locals), speculators, hedgers, and institutions of the commodities and futures markets tend to be professional participants, and thus less prone to behavioral biases. Nevertheless, the fast-paced action of these markets is an environment that fosters behavioral errors. This chapter reviews the literature on the pervasiveness of prospect theory behavior and other biases in these markets. Strong evidence indicates that market participants exhibit loss aversion, the impact of reference points, the disposition effect, and overconfidence. They also engage in positive feedback trading and momentum investing. Lastly, the chapter reviews risk-taking and behavioral biases by the type of market participant, particularly focusing on market makers, floor traders, clearing members, and the public.