Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Do You Have to Settle for Mediocre Returns in The Stock Market?

Stock-Markets / Stock Markets 2015 Dec 10, 2015 - 03:44 PM GMT

By: Sol_Palha

Stock-Markets

"In the republic of mediocrity, genius is dangerous." ~ Robert Green Ingersoll

Morgan Stanley surprised everyone or, at least, tried to by stating that it was no longer going to be easy to make money in the equity markets. Let's stop, right there; was it ever really easy. If it were everyone that jumped into the markets would be wealthy, instead the opposite is true. Right of the bat, we can state that the best place for such advice is the dustbin.


They went on to inform portfolio managers that the days of easy money were over and that they should expect Paltry gains of roughly 5%. Well, most, investors have been used to paltry gains as they have parked their money into treasuries, risking returns in their quest for safety.

They then went to state that the so-called Efficient Frontier model is about to collapse as indicated in the image below.

The falling Efficient Frontier
Source Bloomberg.com

The only thing that caught our attention was the word collapse, and that to us means opportunity. We are not going to bother with the rest of the analysis because it's total hogwash. It has never been easy to make money in the markets, and that is why the majority of players lose. At the same time, it is not as hard as many would have you believe. Some effort on your part is needed; the saying all play and no work make Jack a dull boy comes to mind. Trends come, and trends go and the only way to make money consistently is to identify new trends at the onset; you certainly are not going to make any headway listening to these talking heads.

So what these chaps are in effect stating is that you can now only make money if you opt for risk as opposed to growth. Was there ever such a thing as a risk-free investment, and has not the Fed forced individuals to speculate by maintaining an environment of ultra-low rates for an inordinate period.

The mere act of getting up and going to work entails some risk; you could get hit by a bus on the way to work or drop dead from a heart attack. In that sense, living is a risk, as your life could and will come to a sudden end one day. Do you see what we mean when we state this line of thinking is utter rubbish?

Morgan Stanley suggests that the traditional portfolio that contains a mix of stocks and bonds won't work and only provide one with mediocre to paltry returns. However, they are basing this on a 50:50 stock bond portfolio. This strategy has two problems, over emphasis on bonds and focusing on traditional stocks; even worse it is their focus on a specific model. We believe that the Model is the problem and not the market. The solution is simple. Instead of focusing or obsessing over a single strategy, the focus should be on finding the new trends. Look for companies that are growing and leaving their competition in the dust. Even in the worst of markets, there are always companies that innovate and find new ways to improve the bottom line. If you focus on the traditional model, then Morgan Stanley has a point, but that point is only valid because the advice is based on an outdated strategy. Do not fixate on a strategy or a model; focus on selecting the right mix of assets.

The chart below indicates that you do not have to settle for mediocre. All one needs to do is change the model and the result changes. We used ETF's only; had we used individual stocks the results would have been even more stunning. Additionally, we do not even choose the best ETF's, and we purposely threw in the Gold ETF and over the long run it, the performance is not too shabby. However, if you were following trends, you would have got out this sector long ago. Now imagine what your gains would look like if you decided to focus on the fasted growing sectors and then invested in some of the top stocks in that sector. The point we are trying to make is that stock gains will always be mediocre if the model itself is mediocre in nature. Change the model and the outcome changes.

High priced firms seem to be great at doing only one thing, and that is constantly telling you how the paradigm has changed and in most cases delivering mediocre returns. So perhaps the title should have been; high priced investments firms will only deliver mediocre returns due to their inability to adapt to changing market conditions. Which then begs the question, why do you need them, if that is all they can deliver.

Game plan

Stop listening to the so-called experts and take control of your money. If you are young, then you can take on extra risk, and dedicate some money to plays that are more speculative in nature, but that offer the potential for larger gains. In general, investors should stop stop basing your investments decisions on outdated models. The focus should be on finding the fastest growing sectors, stocks that offer high growth potential and on corporations whose profits are trending upwards, and you will fare a lot better than the average investor. There are other strategies such as writing covered calls or selling naked puts that can be used to increase your income without taking on an extra risk. Both these options strategies carry the same risk or even less than buying stocks.

We are not in the age of mediocrity; the only mediocrity we see is the advice that so-called top firms are dishing out to their clients. Lastly, the best time to get into an investment is when it's despised, and the best time to get out is when the crowd is jubilant.

"Mediocrity can talk, but it is for genius to observe." ~ Benjamin Disraeli

by Sol Palha

www.tacticalinvestor.com

Sol Palha is a market analyst and educator who uses Mass Psychology, Technical Analysis and Esoteric Cycles to keep you on the right side of the market. He and his partners are on the web at www.tacticalinvestor.com.

© 2015 Copyright Sol Palha- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in