Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
You might be thinking of the Efficient Market Hypothesis..
You don't need to invest better than most people to make money in the stock market as long as you have a long-term view.. after all, the stock market grows faster than inflation on average over the long run but may have bad years here and there so be wary of that.
Agreed.
Most people don't even get the published returns in mutual funds (index funds or otherwise), because they consistently buy and sell at inopportune times.
The best thing you can do is to BE CONSISTENT. Buy shares consistently. People tend to get better returns in balanced funds precisely because they're easier to stick with.
It makes sense to me only to invest in the stock market during an expansion, and during an expansion, why not invest only in cyclical sectors. That's what makes sense to me.
I know that if I put some money in a fund and left it for decades, it would grow.
But I am now interested in getting the most out of the periodic expansions and recessions. This is why I need to use the Economic Indicator Index to know what is about to happen.
But also, not every investor watches these indices. I am not sure what percentage of the money in the markets is from professionals and how much is your average Joe who may or may not know what he/she is doing.
I think you're beating your head against a wall here. You're putting too much effort/energy into something you have minimal control over. It would be MUCH better to put your efforts into earning more and spending less so that you can save a higher percentage of your income.
A funny thing happens when your after tax savings rate hits 50%. You don't need your savings to compound at a high rate. As hard as it sounds to hit a 50% savings rate, it's actually easier than what you're trying to do. The details are explained here:
It's extremely hard to do consistently. You have a lottery player's mindset. With this kind of thinking, the odds are heavily stacked against you. Most successful investing is BORING...like watching paint dry. Sure there will always be a few who make a killing with their predictions just as there will always be people who win the lottery, but both are so rare they're not worth considering.
The Conference Board published indices of leading, lagging, and coincident economic indicators. This should at least tell me something. I am not interested in spending hours and hours getting into the stock market. I've done that before and it is boring.
I would be happy putting money into the primary bond market, but maybe I could get a little more if I put it into some stocks from time to time.
Being able to read these indicators is the key, I think. What does it mean if the index of leading economic indicators is at 104.4 (relative to 100 in 2004). What does this mean for the next 3-9 months of the economy?
So, there are no patterns, no tricks, no magic websights, no "stock market gurus" that can help you...it's essentially los vegas style gamming. ...
No, that's not the correct interpretation.
In Las Vegas style gaming, you bet, say, $100, and that bet has a long-term Expected Value (EV) that is negative.
When you invest in a company by purchasing a share of its stock at, say, $100, you are not betting anything. You now own an asset. In Las Vegas style gaming, you do not own an asset. In the stock market, you do - and that asset, a share of a corporation, has a business model that involves generating profits on an ongoing basis, in which you participate. Insert obvious variances in the market, and you're done.
It makes sense to me only to invest in the stock market during an expansion, and during an expansion, why not invest only in cyclical sectors. That's what makes sense to me.
Now only if I could predict those expansions.
I wish to have this superpower, just as much as the best hedge fund managers in the world do (who are successful despite lacking this special ability).. and yet, neither of us are successful at this endeavor.. at least not successful enough to make it worth the trouble and risk of losing a boatload of money if our predictions are wrong.
Market timing requires near perfection to carry out effectively. You not only need to know when to be buying with great accuracy but also when to be selling as well. Even if your ability to predict markets is accurate but not perfect, one single bad trade is enough to derail all the gains that you made through years of sweat, stress, and anxiety trading glued to 10 monitors.
A good analogy to the accuracy required is driving. Think of trading a stock like passing close to another car. Good trade = when you avoid hitting another car. Bad trade = when you hit another car. If you can drive with a 99% probability of not hitting another car each time you get close, you're gonna be in a lot of accidents and possibly end up dead, if not without a license very soon. But nobody, not even the best trades in the world, can come anywhere near a 99% accuracy.
You can do fine in the long run by creating a portfolio that is not likely to get hosed in almost every possible economic scenario and contributing and rebalancing it periodically. This is known as Passive Investing and it should be the staple of where most of your net worth is parked. In fact, even professional traders who speculate will only do so with the money they can afford to lose and will periodically transfer their trading profits to their passive portfolio which makes a comfortable 5-15% return each year on average.
Investing isn't an effortless endeavor even if you pursue passive investing either. You'll need to determine an asset allocation (combination of stocks, bonds, commodities, etc.) that will fit your risk tolerance. Then buy funds in these asset classes to create that passive portfolio. If you don't know where to begin, start with a few asset allocations that have had excellent track records over many decades then tweak them to fit your risk and return expectations:
The Conference Board published indices of leading, lagging, and coincident economic indicators. This should at least tell me something. I am not interested in spending hours and hours getting into the stock market. I've done that before and it is boring.
I would be happy putting money into the primary bond market, but maybe I could get a little more if I put it into some stocks from time to time.
Being able to read these indicators is the key, I think. What does it mean if the index of leading economic indicators is at 104.4 (relative to 100 in 2004). What does this mean for the next 3-9 months of the economy?
The data published by the Conference Board is well known and often anticipated in advance. Forget about using it to predict how well the stock market is going to do, especially in the short term. You're looking for a quick fix sliver bullet and there isn't one.
Put your efforts where they have a much greater chance of being rewarded....Increase your savings rate by reducing spending, increasing income, or both. Then invest those savings in a mutual fund that invests primarily in stocks, such as a stock market index fund or the balanced funds I suggested, or one of the 2 strategies suggested by ragnarkar above (The balanced strategies are still mostly stocks, but offer a smoother ride than a stock market index fund). I know, this is not what you want to hear, but it is what you NEED to hear.
The higher your savings rate, the less dependent you are on high rates of return.
That being said, if you have long term view you can definitely enhance your returns versus the non existent interest and currency devaluing efforts being taken by the controllers of the US dollar based on strategically diversifying across real asset producing equities.
Still not a guarantee as it is difficult to run with the techno algorithm driven big boys steering the markets. Read The Wall Street Jungle and Making it In the Market by Richard Ney. I think the pdf is available on line.
1. What are your finical goals? Fr instance, for...my goals are just to keep on making money and investing it.
2. What do you want from the stock market? For instance, for me..I am happy with a yearly 6% return to meet my goals of what I want from the market.
3. How much time and money do you have to dedicate to get what you want from the market? For instance, for me..I have about 10 minutes a year to dedicate to the stock market. I use to have more time.
Until you answer those questions, its hard to help you out.
Thanks,
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
