Here's a rephrased question:
What is an invalid reason to "know if you are wrong"?
Answer:
If the price goes up or down in the future.
Examples:
In hindsight in late January, had it been "wrong" NOT to buy GameStop at $100/share in mid-January? In hindsight by mid February however, was it "right" not to buy GameStop at $100/share in mid-January? Does correctness zig zag?
If I go to a casino and bet my entire retirement on black at the roulette table, will that be a "right" or "wrong" decision only after we learn the result? Am I really brilliant if I win, and a dumbass if I lose?
Rationale:
Fundamentals analysis does not apply to investments with no internally generated returns or distributions, so past price changes are irrelevant to the odds of future changes in price. There is no such thing as "cheap" or "expensive" for investments that are based entirely upon the expectation others will pay more for it in the future (examples: precious metals, cryptocurrencies, art and collectibles). Whether such expectations are true is probably unknowable for most people, so these non-productive asset classes mostly represent gambling.
What we are really asking is: Are decisions "good" or "right" because of their outcomes, which can be mere chance, or because of their processes, which can be repeated if proven reliable? Which would you rather have - the opportunity to take chances or a repeatable decision process that is usually profitable? Who is smarter, the person who is capable of gambling or the person who is capable of creating fairly reliable decision processes?
Also, we don't get the benefit of hindsight when we're trying to make rational decisions in the present. If outcomes determine the goodness or badness of a decision, we might as well guess because there is no way to know in advance if we're being good decision makers. In this mindset, a decision to sell VTSAX and go all-in on Spank Coin (an actual crypto) as a retirement plan cannot be judged until the results are in.
IMO, one can make the "right" decision to bring an umbrella even if it doesn't rain, or to not buy lotto tickets even if one would have won, or to go on a bike ride even if it resulted in a crash. It's the process, not the luck, that makes the difference for most people in the long run.
I want to add a few things here that I believe this fundamental analysis gets wrong and I see a lot of people often cite this hypothesis for a rationale for their investments. I wanted to dispute the following hypothesis:
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The idea that "productive" investments are "valid" because they produce returns (or dividends) and are thus a "better" investments because of this compared with investments based on "the expectation that others will pay more in the future" (another wording for the term demand).
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The reason why this analysis is flawed and what it misses is that
every investment is based on demand. Let's say you're investing into a company (let's just use VISA to stick with the financial industry) and you're investing in them because they're a productive company that pays out a dividend. If you think that's somehow different from simple demand based investing (like commodity, real estate, bitcoin, etc), then you're missing the entire concept behind investing in the first place.
VISA, a financial services company, isn't in business (and thus doesn't pay a dividend) if there isn't continued demand for their services (payments). If somehow, VISA as a company is disrupted in the payments industry by some new technology or another company, then VISA stops earning a profit and thus stops paying a dividend and if that continues, they'll cease to be a company. And all while that is taking place (because of decreased demand for their services) their stock price is going down. No matter what your investment is, there is no decoupling the speculation on what future demand is for that investment from the outcome (gain/loss) of your investment.
All that remains is the risk involved with determining the degree of accuracy at which you can predict future demand. Well establish market participants usually have fairly stable demand and so there is lower risk in predicting future demand, but there is also likely lower upside with such an investment. Furthermore, usually when there is more uncertainty as to what future demand will look like, there is more risk in such an investment, but also greater upside. As investors, it simply comes down determining your risk appetite and making a personal judgement on what you feel future demand will be for any given service. If you don't feel like analyzing every market or you don't have the expertise in a particular market, then that's where index investing is helpful since you can help spread that risk across the demand in multiple markets.
If you're buying VISA stock, you're speculating that the future demand for VISA's services will continue to rise. If you're buying bitcoin, you're speculating that the future demand for bitcoin's services will rise. There is no difference between the two. It is all about
demand for something and that
demand is all based on human subjectivity that must be speculated upon.