Best of the Week
Most Popular
1. Ray Dalio: This Debt Cycle Will End Soon - John_Mauldin
2.Stock Market Dow Plunge Following Fake US - China Trade War Truce - Nadeem_Walayat
3.UK House Prices 2019 No Deal BrExit 30% Crash Warning! - Nadeem_Walayat
4.What the Oil Short-sellers and OPEC Don’t Know about Peak Shale - Andrew_Butter
5.Stock Market Crashed While the Yield Curve Inverted - Troy_Bombardia
6.More Late-cycle Signs for the Stock Market and What’s Next - Troy_Bombardia
7.US Economy Will Deteriorate Over Next Half Year. What this Means for Stocks - Troy_Bombardia
8.TICK TOCK, Counting Down to the Next Recession - James_Quinn
9.How Theresa May Put Britain on the Path Towards BrExit Civil War - Nadeem_Walayat
10.This Is the End of Trump’s Economic Sugar High - Patrick_Watson
Last 7 days
Theresa May No Confidence Vote, Next Tory Leader Betting Market Analysis and Forecasts - 12th Dec 18
Gold & Global Financial Crisis Redux - 12th Dec 18
Wow Your Neighbours With the Best Christmas Projector Lights for Holidays 2018! - 12th Dec 18
Stock Market Topping Formation as Risks Rise Around the World - 11th Dec 18
The Amazing Story of Gold to Gold Stocks Ratios - 11th Dec 18
Stock Market Medium term Bullish, But Long Term Risk:Reward is Bearish - 11th Dec 18
Is a Deleveraging Event about to Unfold in the Stock Market? - 11th Dec 18
Making Money through Property Investment - 11th Dec 18
Brexit: What Will it Mean for Exchange Rates? - 11th Dec 18
United States Facing Climate Change Severe Water Stress - 10th Dec 18
Waiting for Gold Price to Erupt - 10th Dec 18
Stock Market Key Support Being Re-Tested - 10th Dec 18
May BrExit Deal Tory MP Votes Forecast, Betting Market Analysis - 10th Dec 18
Listen to What Gold is Telling You - 10th Dec 18
The Stock Market’s Long Term Outlook is Changing - 10th Dec 18
Palladium Shortages Expose Broken Futures Markets for Precious Metals - 9th Dec 18
Is an Inverted Yield Curve Bullish for Gold? - 9th Dec 18
Rising US Home Prices and Falling Sales - 8th Dec 18
Choosing Who the Autonomous Car Should Kill - 8th Dec 18
Stocks Selloff Boosting Gold - 8th Dec 18
Will Weak US Dollar Save Gold? - 7th Dec 18
This Is the End of Trump’s Economic Sugar High - 7th Dec 18
US Economy Will Deteriorate Over Next Half Year. What this Means for Stocks - 7th Dec 18
The Secret Weapon for Getting America 5G Ready - 7th Dec 18
These Oil Stocks Are a Ticking Time Bomb - 7th Dec 18
How Theresa May Put Britain on the Path Towards BrExit Civil War - 7th Dec 18
How easy is it to find a job in the UK iGaming industry? - 6th Dec 18
Curry's vs Jessops - Buying an Olympus TG-5 Tough Camera - 5th Dec 18
Yield Curve Harbinger of Stock Market Doom - 5th Dec 18
Stock Market Crashed While the Yield Curve Inverted - 5th Dec 18
Global Economic Outlook after Trump-Xi Trade War Timeout - 5th Dec 18
Stock Market Dow Plunge Following Fake US - China Trade War Truce - 5th Dec 18
Subverting BREXIT - British People vs Parliament Risks Revolution - 5th Dec 18
Profit from the Global Cannabis Boom by Investing in the Beverage Industry - 4th Dec 18
MP's Vote UK Government Behaving like a Dictatorship, in Contempt of Parliament - 4th Dec 18
Isn't It Amazing How The Fed Controls The Stock Market? - 4th Dec 18
Best Christmas LED String and Projector Lights for 2018 - Review - 4th Dec 18
The "Special 38" Markets You Should Trade ebook - 4th Dec 18
Subverting BrExit - AG Confirms May Backstop Deal Means UK Can NEVER LEAVE the EU! - 3rd Dec 18
The Bottled Water Bamboozle - 3rd Dec 18
Crude Oil After November’s Declines - 3rd Dec 18
Global Economic Perceptions Are Shifting - Asia China Markets Risks - 3rd Dec 18
Weekly Charts and Update on Equity Markets, FX Trades and Commodities - 3rd Dec 18
TICK TOCK, Counting Down to the Next Recession - 3rd Dec 18
Stock Market Key (Short-term) Support Holds - 3rd Dec 18
Stocks Bull Market Tops Are a Process - 3rd Dec 18
More Late-cycle Signs for the Stock Market and What’s Next - 3rd Dec 18
A Post-Powell View of USD, S&P 500 and Gold - 2nd Dec 18
Elliott Wave: SPX Decision Time Is Coming Soon - 2nd Dec 18

Market Oracle FREE Newsletter

How You Could Make £2,850 Per Month

If You Want to Invest in the Stock Market, You Need to Master This Skill

InvestorEducation / Learning to Invest Jan 18, 2018 - 02:18 PM GMT

By: Chad_Champion

InvestorEducation

Let’s start with the bad news first…

There’s a finance theory called the efficient market hypothesis. One of the titans of finance, Eugene Fama, developed it back in 1965.

In short, it says that stock market prices fully reflect all current information. In other words, stocks are always trading at their fair value.

If that’s true, it means that there’s no way for investors to find undervalued investment opportunities or know when to sell when stocks are trading at overvalued prices.


Now, we know that’s not true. But, recent data shows that it is incredibly hard to beat the market.

A study from Standard & Poor’s shows only a small group of investors beat the market over the long-term. The study looked at data over the last fifteen years.

Here’s what they found…

92.2% of large cap funds failed to beat a simple S&P 500 Index fund. The percentage was even higher, 95.4% and 93.2%, for mid-cap and small cap funds.

Maybe we should all just buy a simple S&P 500 Index fund and call it a day!

That’s no joke. The odds are about 1 in 20 of beating the market.

But wait… There’s more!

Here’s the good news…

Thankfully, we know that it is possible to beat the market. Even though the study shows the odds are stacked against most investors.

That’s why, at The Champion Investor, we study the greatest investors in history… Like Warren Buffett, Peter Lynch, John Templeton, and others who have beat the markets over long time-periods.

They got incredibly rich doing it too. By studying their methods, we can increase our odds of beating the market and make a lot of money while doing it.

Now, to be fair, most investors probably should just by an index fund and call it a day.

Maybe they don’t have the time it takes to study businesses and find undervalued investment opportunities. Maybe they’re entrepreneurs and invest their money back into their business.

Or, they don’t want to take the time to be active with their financial advisor. Or, they don’t want to take the time to read a good investment newsletter.

That’s fine.

But if you do want to take an active approach to investing, then you need to master the same skill as the small group of investors who have beat the market over long time-periods.

Here’s the cool part…

It’s not about mastering accounting, finance, math, or how to build discounted cash flow models.

Of course, it doesn’t hurt to have knowledge about those things.

But this skill is much simpler to learn…

The skill you need to master is to be able to buy stocks when others are panicking in the streets, and to sell stock when others are partying like it’s 1999.

In other words, you want to buy what’s “hated” on Wall St. and sell what’s “loved” on Wall St.

Now, just because it’s simple doesn’t mean it’s easy. Because human nature makes it very hard for most people to do. (It’s probably easier to master accounting or math!)

It takes a strong stomach, courage, and fortitude to master this skill.

The bottom line is that the best investors blaze their own trail. They have an independent spirit.

Most importantly, they know that fear and greed are what control the stock market. Fear pushes prices too low. Greed pushes prices too high.

When investors panic, successful investors get interested in buying and start looking for value. When investors get greedy, successful investors get interested in selling, hedging, and/or looking for value in some other market or asset.

I’ve talked a lot about how to understand price and value before. You can catch up here.

Price and value are an investor’s compass for knowing when fear has pushed prices too low and greed has pushed prices too high.

I’ve also talked about mean reversion and how most investors don’t use it to their advantage. You can read more here.

I’ve also told you about a few simple concepts you can use to beat the market. You can catch up here.

So, you already know the basics of how to do this…

Consider blazing your own trail and start mastering this skill today.

By Chad Champion

http://thechampioninvestor.com

Chad Champion is the Founder and Chief Investment Strategist at The Champion Investor. .

The Champion Investor is focused on helping investors navigate the global markets, find undervalued investment opportunities, and create a second income stream using options.

You can sign up for The Champion Investor’s Global Research & Strategy Notes for free here.

Chad has a Finance and Investment Management background with a Master’s Degree focused in Investment Management and Financial Analysis and a Masters of Business Administration focused in Financial Management.

He spent the past couple of years working as the lead analyst at Casey Research and as a research analyst for Bill Bonner at Bonner and Partners.

© 2018 Copyright Chad Champion - 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.


© 2005-2018 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

6 Critical Money Making Rules