I am going to stick with my conclusions on this subject even though my article has done horribly in the ratings. The reason is the title. The title is “How can the CASUAL INVESTOR beat the market.” (emphasis added)
For those who think they are above the average, you may want to reassess, or this article may not be for you. But, the advice stands for those who are not market professionals, and many who are.
Therefore, my standing comments are as follows:
As a wise man once said, “The best way to double your money is to fold it and put it in your pocket.”
The stock market has a factor I call the capital “E.” And, that is “expectations,” folks! No matter how thorough you are at dissecting financials and doing all of the comparative analyses that became so popular in the MBA (I am one, myself) age, a simple word slipped by someone well known in the financial world can make your world come tumbling down around you.
For evidence of that, look at all of the pensions that were severely damaged, or lost during periods of bear markets. In many cases, the only thing unfueling the stock markets at those times were scares brought on by declining expectations.
When I was younger, I used to fool around with writing a formula that could fairly represent what investors, and therefore the market, would do. I always placed a little “e” in my formulas to represent the expectations of those who buy and sell stocks.
As I have grown older, and I hope a little wiser, that little “e” has ballooned into a capital “E.” It is the one overriding factor against which no amount of research or dissection of data can stand. It will have your 401(k) in shambles in a matter of days.
I hope someone pays attention to this old “gray-hair” because I have seen many friends and co-workers have their retirement plans dashed on the hopes and promises the stock market offered. They listened to those many individuals who seem to explode on the scene, with all kinds of great, get-rich advice, when we are in a bull market. They are a little harder to find when your savings disappear.
Of course there are good stocks to buy! As lay-people in this business, we just do not know what they are. And, guess what, nobody is going to tell us. Please make the stock market a very minor piece of your portfolio, this current expansion of the market will deflate when you least expect it and leave your life a lot worse off for having believed you were going to get rich quick.