Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
USDT is 9-11 for Central Banks the Bitcoin Black Swan - Tether Un-Stable Coin Ponzi Schemes! - 30th Jul 21
Behavior of Inflation and US Treasury Bond Yields Seems… Contradictory - 30th Jul 21
Gold and Silver Precious Metals Technical Analysis - 30th Jul 21
The Inadvertent Debt/Inflation Trap – Is It Time for the Stock Market To Face The Music? - 30th Jul 21
Fed Stocks Nothingburger, Dollar Lower, Focus on GDP, PCE - 30th Jul 21
Reverse REPO Market Brewing Financial Crisis Black Swan Danger - 29th Jul 21
Next Time You See "4 Times as Many Stock Market Bulls as There Are Bears," Remember This - 29th Jul 21
USDX: More Sideways Trading Ahead? - 29th Jul 21
WEALTH INEQUALITY WASN'T BY HAPPENSTANCE! - 29th Jul 21
Waiting On Silver - 29th Jul 21
Showdown: Paper vs. Physical Markets - 29th Jul 21
New set of Priorities needed for Unstoppable Global Warming - 29th Jul 21
The US Dollar is the Driver of the Gold & Silver Sectors - 28th Jul 21
Fed: Murderer of Markets and the Middle Class - 28th Jul 21
Gold And Silver – Which Will Have An Explosive Price Rally And Which Will Have A Sustained One? - 28th Jul 21
I Guess The Stock Market Does Not Fear Covid - So Should You? - 28th Jul 21
Eight Do’s and Don’ts For Options Traders - 28th Jul 21
Chasing Value in Unloved by Markets Small Cap Biotech Stocks for the Long-run - 27th Jul 21
Inflation Pressures Persist Despite Biden Propaganda - 27th Jul 21
Gold Investors Wavering - 27th Jul 21
Bogdance - How Binance Scams Futures Traders With Fake Bitcoin Prices to Run Limits and Margin Calls - 27th Jul 21
SPX Going for the Major Stock Market Top? - 27th Jul 21
What Is HND and How It Will Help Your Career Growth? - 27th Jul 21
5 Mobile Apps Day Traders Should Know About - 27th Jul 21
Global Stock Market Investing: Here's the Message of Consumer "Overconfidence" - 25th Jul 21
Gold’s Behavior in Various Parallel Inflation Universes - 25th Jul 21
Indian Delta Variant INFECTED! How infectious, Deadly, Do Vaccines Work? Avoid the PCR Test? - 25th Jul 21
Bitcoin Stock to Flow Model to Infinity and Beyond Price Forecasts - 25th Jul 21
Bitcoin Black Swan - GOOGLE! - 24th Jul 21
Stock Market Stalling Signs? Taking a Look Under the Hood of US Equities - 24th Jul 21
Biden’s Dangerous Inflation Denials - 24th Jul 21
How does CFD trading work - 24th Jul 21
Junior Gold Miners: New Yearly Lows! Will We See a Further Drop? - 23rd Jul 21
Best Forex Strategy for Consistent Profits - 23rd Jul 21
Popular Forex Brokers That You Might Want to Check Out - 22nd Jul 21
Bitcoin Black Swan - Will Crypto Currencies Get Banned? - 22nd Jul 21
Bitcoin Price Enters Stage #4 Excess Phase Peak Breakdown – Where To Next? - 22nd Jul 21
Powell Gave Congress Dovish Signs. Will It Help Gold Price? - 22nd Jul 21
What’s Next For Gold Is Always About The US Dollar - 22nd Jul 21
URGENT! ALL Windows 10 Users Must Do this NOW! Windows Image Backup Before it is Too Late! - 22nd Jul 21
Bitcoin Price CRASH, How to SELL BTC at $40k! Real Analysis vs Shill Coin Pumper's and Clueless Newbs - 21st Jul 21
Emotional Stock Traders React To Recent Market Rotation – Are You Ready For What’s Next? - 21st Jul 21
Killing Driveway Weeds FAST with a Pressure Washer - 8 months Later - Did it work?- Block Paving Weeds - 21st Jul 21
Post-Covid Stimulus Payouts & The US Fed Push Global Investors Deeper Into US Value Bubble - 21st Jul 21
What is Social Trading - 21st Jul 21
Would Transparency Help Crypto? - 21st Jul 21
AI Predicts US Tech Stocks Price Valuations Three Years Ahead (ASVF) - 20th Jul 21
Gold Asks: Has Inflation Already Peaked? - 20th Jul 21
FREE PASS to Analysis and Trend forecasts of 50+ Global Markets by Elliott Wave International - 20th Jul 21
Nissan to Create 1000s of jobs with electric vehicle investment in UK - 20th Jul 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

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.


© 2005-2019 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