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Yes! ....You still can make money from the markets
All you have to look for is Explosive Earnings Growth!
Markets go up, and they go down.
I know you’ve probably read all this before and it all seems so elementary, right?
It would appear so, but do you know how many people get this wrong?
Most people, even traders, make this mistake. It’s the reason so many people hate the stock market and prefer property.
Do you know why they prefer property? Because no one comes around to you every day and puts a value on your properties. Imagine if someone were to write about your property every day and then took a consensus of real estate agents and other investors and asked them what your property was worth, every day. You’d swing from elation to depression every 24 hours, your emotions would send you mad! One day your property would be worth 10% more than it was yesterday and you’d be opening the champagne only to pour what was left in your glass back into the bottle the next when you realised you could no longer afford to drink champagne because the price of your investment had fallen again. That’s what happens on the stock market.
The market as a whole, revalues shares every working day.
Now, they revalue the shares based on the information available today, prospects for tomorrow, investment objectives of shareholders and the emotions of millions of investors from around the world….. How can this be an accurate reflection of the value of the company? It’s not. There is no absolute value of anything. It all depends on what someone is willing to pay for it at any given minute of the day. It’s a consensus of value. Just like when you sell your house, you never get what the agents says you’ll get, you always get a different amount simply because there is no absolute value. It’s what people are prepared to pay, at the actual time it is sold.
There is no difference between the property market and the share market. None, they work the same way. It’s just they do valuations at different times.
The valuation of a property is done very seldom, where as a share, it’s done every day…. and this freaks some people out.
If you are a good investor, this won’t worry you at all. You will understand that investing should be a medium to long-term procedure. You don’t buy a house and keep it for two months and expect to make money on the deal. You buy it for 2 to 5 years or even longer. Buying a stocks are the same. When you buy shares in a company, you buy the assets and earnings and earnings growth for the next medium to long-term period, and if you buy correctly you’ll make money because you bought cheap and the price rose due to it’s underlying value (there’s that word again) and you sold them high and made a profit.
Think about this…… You buy shares in Australian mining giant BHP Billiton, and you pay $48 per share. The next day they drop to $46. Is the company affected by this price drop in any way? Do they earn less money and have less net assets due to the market perception of the share price? Do some of the mines close, or do the management of the company change the way they are doing things due to the market saying BHP are worth 4% less than they were yesterday. No, things keep going and the share price is pretty much ignored by the company, the potential profits don’t change, workers keep mining, manager’s keep managing. Life goes on. The share price is merely perception, not reality.
A collapse in U.S. stock prices certainly would cause a lot of white knuckles on Wall Street . But what effect would it have on the broader U.S. economy? If Wall Street crashes, does Main Street follow? Not necessarily. - Ben Bernanke
"Reality" is the long-term change in price is all that matters!
However, investors still get it wrong. They stuff it up. Their emotions get in the way and they lose focus of why they bought the shares in the first place. Never forget why you bought in the first place.
If you do your homework on an investment properly, you’ll always have faith in your decision. The only time to act, is when information comes along, that would have changed your opinion in the first place as to whether to buy or not.
If this information comes your way… Re-evaluate. Then Act.
Now, I’d like to show you a graph of how many investors react to the stock market due to emotional issues (i.e. can’t control them). They buy high and sell low, whereas, the idea is to buy LOW and sell HIGH. Subtle difference I know, but one that makes a big difference to your bank balance.
Now, be honest… who hasn’t had a trade that didn’t go like this…..
I know I have. In this instance, the trade went horribly wrong because the investor didn’t do two things:
1. Have faith in their homework in the first place which would have prevented them panicking and selling when they shouldn’t have.
2. Re-evaluate the investment and decide whether to use their Stop Loss Strategy (which I’ll explain later) or buy more at the lower prices when they occurred.
Remember, the market is mass perception, not necessarily reality.
Why would a stock react this way and why do they jump around so much?
How long is a piece of string? There are many reasons why a share reacts badly. Have you ever noticed when a company comes out with a huge announcement that their profits have increased 150% and their sales are up 140% and every thing is great and then the share price drops?
This is one that has everybody baffled, but this is simple really. The market perception was that the earnings and sales were going to be possibly higher than even these increases and therefore the belief was that the share price had been too high. So, the price dropped.
Another possible reason for the drop in share price could have been that a large institutional buyer decided that it was time to move onto other opportunities and dropped a large parcel of shares onto the market bringing about a temporary drop in price. Sometimes these are opportunities for the savvy investor who has a different perception of value.
Shares do go up and down every day, sometimes erratically and the reasons can vary. Some examples are:
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Mining shares go up and down based on the prevailing market price of the commodities they are mining.
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Interest rate changes have an effect on most companies. Rises cause corporate profits and economic activity to slow, this causes a drop in prices. Falls are good for economic activity and therefore corporate profits.
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Individual company announcements such as management changes, revisions of future earnings prospects, current earnings announcements.
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Takeover announcements
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Large “parcels” of shares being either bought or sold by institutions can have a dramatic effect on price.
There are lots of other reasons that prices can change, but the important thing to always remember is the fundamental reason why you bought it in the first place. Don’t get “spooked” by sudden movements downwards unless there is information that would have changed your decision to buy them in the first place.
Great Investors aren’t Born….. They’re Created
One of the important things to understand, is that it does NOT take great intelligence to understand investment. It just takes time. Time to learn what the Great Investors have taken the time to learn. If you learn these things and approach investing with the right attitude and discipline, you can’t help but end up wealthy. That’s the truth.
Spend the Time…. Create the Wealth!
That’s all there is to it. Now, I must have heard this a thousand times, “but I don’t have any time!” or “I’m too busy, to spend time reading books and studying this stuff”
If it is, stop reading my philosophy, don't bother subscribing to Trident Confidential, you don’t really want to be wealthy.
I can’t give you the simple one sentence solution to your financial problems or make you rich by 9 o’clock tomorrow morning, not because I don’t want to, but I can’t, because the quick fix doesn’t exist.
Believe me, I have read hundreds of books, spent thousands of hours researching and if the simple solution was out there I would have found it. Like the Leprechaun with a pot of gold at the end of the rainbow, it doesn’t exist…. It took a lot rainbows and getting wet to work this one out, by the way.
No, the creation of a great investor takes time, takes effort, but once you have done the work, the rewards are greater than 100 jobs you might have. So, what’s the problem with people who say they haven’t the time to learn this very profitable skill of investing?
Obviously, you are probably not one of them, because you are still reading this article, so the chances are you’ll be ok, but what about all the others? Well, they comprise the 99% of people who will never be wealthy and there is nothing I can do to change their minds about their priorities.
The majority of people suffer.........
They suffer from.....
Ignorance, they don't want to learn or listen to someone who can show them how to make money. Look here for proof!
Fear, they are paralysed by the fear of losing money to the point they won't make any. Simple trading strategies that I show in Trident Confidential will easily show you how to limit your downside and have infinite upside.
Procrastination, they'll always leave the difficult decisions to another day. Like subscribing to The Trident Confidential Newsletter and the Ultimate Wealth Library. "I'll come back to it later". No, you probably won't and you'll again miss the opportunity to make money sitting right in front of you.
You have to stop thinking, "I'll wait for another time!"
Forget the notion that you will buy at the bottom and sell at the top. That’s an impossible standard to shoot for. I use periods of weakness in the markets to add to my long-term positions as well as to initiate new positions in very oversold sectors.
Fact:
If you had invested $100K in the S&P 500 in 2004, By the end of 2007 you’d have $133,000.
If you had invested the same amount in Trident Confidential’s Portfolio, you would have over $840,000 by now. A difference of $707,000.
In effect, we beat the market by a staggering 2,142%.
The Beauty of Compounding - But first, you have to be Invested!
Fear and greed are our enemies here. In bear markets, fear grips us as we only see prices going lower. In bull markets, greed tells us they must go nowhere but higher. Both emotions rob us of our own reasoning functions, and that ultimately costs us money.
So what is the solution?
1. Get some perspective; become a student of market history.
The US stock market has been around for more than 200 years. Through war, famine and strife it has survived. It will outlive you, me, and all of our generations to come. The financial world isn’t coming to an end any time soon.
This knowledge alone, though ultimately simple, should provide you endless courage in our global financial future.
2. Do not over invest.
This is not gambling, don't put all your money on one investment. Instead carefully choose a portfolio of great companies that in the medium to short term will make you wealthy!
People who bet it all on black usually end up in the red. Bulls make money, bears make money, but hogs get slaughtered. Don’t be a hog. That’s right. I said it. DON’T BE A HOG. You must apply a strict discipline of cash allocation to each investment.
I have one of the best track records in the entire investment newsletter world, with an average win ratio of over 80%. That means I am right over 80% of the time. It also means that I am wrong less than 20% of the time. What happens if I overload into one idea, and it's one of the under 20% ideas?
While my trading strategies will always limit my losses to single digit percentages, who likes losing or being wrong?
3. Lengthen your time horizons; learn to think in months and years instead of minutes and days.
It's OK to generate wealth over time. Growing up in a working class environment in Australia, I remember how I longed to be rich. During my formative years trading the stock market, I made the mistake of wanting to be rich RIGHT NOW! That kind of wealth can happen, but it is typically very fleeting.
As much money as I have made over the years, I would have made MUCH, MUCH, MUCH more had I just been more patient in my earlier years. This is a lesson that has revealed itself to me as I have gotten older.
Why? Because great market timers exist only in the land of garden fairies and elves that live in hollow trees. Superior stock market performance is the result of stock selection, not trying to pick the next rally or correction.
But if I can give you a tip....... At the end of the day, it's Earnings that matter! Only invest in companies that are growing their earnings at a greater rate than the market average.... and you will beat the market! That's what we do here at Trident Confidential, we invest in stocks with exponential earnings growth. It's that simple really.
If you’re skeptical, lend an ear to the most successful investors of all time. They’ve all expressed their thoughts on market timing on many occasions. Here’s just a brief sampling:
Benjamin Graham, the father of value investing: "If I have noticed anything over these 60 years on Wall Street, it is that people do not succeed in forecasting what’s going to happen to the stock market."
Warren Buffett, chairman of Berkshire Hathaway: "We've long felt that the only value of stock forecasters is to make fortune tellers look good. Even now, Charlie and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children."
John Templeton, pioneer of global investing and legendary manager of the Templeton Growth Fund: “I never ask if the market is going to go up or down next year. I know there is nobody who can tell me that.”
Peter Lynch, the best performing mutual fund manager of all time, in his book, One Up on Wall Street: "Thousands of experts study overbought indicators, oversold indicators, head-and-shoulder patterns, put-call ratios, the Fed's policy on money supply, foreign investment, the movement of the constellations through the heavens, and the moss on oak trees, and they can't predict the markets with any useful consistency, any more than the gizzard squeezers could tell the Roman emperors when the Huns would attack.”
He ends his book by telling readers, “What the market is going to do ought to be irrelevant. If I could convince you of this one thing, I'd feel this book had done its job."
I know this message goes against the instincts – not to mention the chaotic emotions – of most investors. But it boils down to this: You can listen to an investment advisor or stock market guru who has a market timing system to sell. (Or the "know-it-all" at the next BBQ.) Or you can listen to the greatest investors of all time.
The choice is yours.
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