Politics 7 December 2012 Why investing is like having a barbeque/boarding a boat/playing rock-paper-scissors Analogy of the week. Print HTML Financial advice abounds with analogies, but here's a particularly digestable one from Matt King at Citi via Ft Alphaville: Its a nice contrast with the more laboured contributions we usually get. Here's Morning Star's stock course taking a nautical approach: The main thing you can control is what ship to board. Think of the seaworthiness of a ship as the competitive positioning of a business, and the horsepower of the engine as its cash flow. Some ships have thick, reinforced metal hulls, while others have rotting wood. Clearly, you would pick the ships that are the most seaworthy (with the best competitive positioning) and have the most horsepower (cash flow). Though the ship’s captain (company management) certainly matters, the quality of the ship is more important. On a solid vessel, as long as the captain does not mess up, there is not much difference between a good and a great captain. Meanwhile, there is nothing the best skipper can do if the boat’s engine is broken and the boat is constantly taking on water (poor business). To relate this to stocks, business economics trump management skill. And here's the Wall Street Journal explaining a heavily annotated rock-paper-scissors analogy from LPL Financial: The comparison is meant to illustrate the factors to consider – and their relative importance – when evaluating an investment: Rock (valuations-the current worth of an asset or a company) beats scissors (fundamentals-the relevant data that influence value, such as a company’s balance sheet and income statement). Scissors beats paper (technicals-an analysis of statistics generated by market activity, such as past prices and volume.) Paper, of course, beats rock — so there is no one best solution for all circumstances. It's all so much clearer now. › Five questions answered on Netflix's Facebook "violation" Sausages. Photograph: Getty Images Subscribe More Related articles We are heading for the next recession – it's crucial the right people are in charge Five years of profitable themes and stocks… Chinese loan sharks are using nudes as collateral. Is this the grim future of revenge porn?