The evidence is that the casual investor can not beat the market. The definition of beating the market arises from the ability of an investor to earn a higher rate of return than the market as a whole earns. Say over a year the market rose on average 8% an investor would be beating the market if he or she continually managed a return greater than 8% year on year. Being able to gain at least 20% on a share price is difficult and with averages the chances are far shorter.
In theory and in practise it is almost impossible to beat the market. The market is highly liquid area and any news past or present tends to be factored in the share price at the time of a casual investor buying. This makes those people who study share price chart movements unable to regularly buy a stock on the Tuesday after it has fallen a few days before and hope to make a return.
In practise if a casual investor has inside information then of course they are likely to make abnormal returns if the information is true and what the market wants to hear and beleive. In saying this point the market can spot false accounting information. In practise inside information is illegal and punishable by law. This would be the proper way to invest, in the absense of some top quality inside information.
An investor perhaps using thorough research and calculating a number of theoretical valuation models and using this information to apply the theory with the knowledge can perhaps make better decisions.
From newspapers and magazines that specialize in share tips and company information this might well be useful in knowing some company background details and news. Though the danger of using this type of information in making an investment buy or sell decision is that the news is worthless. The share price will have already adjusted itself to all information available whether it be publically where investors know about this from the media, or privately through internal buying of the stock. Sharetips will not beat the market.
In investing as a guide, buying a portfolio of stocks is perhaps the way to creating a well diversified portfolio of stocks. The way to do this is to have some risky high beta shares and combine them with low beta companies. The beta of the market is considered as being low risk when the beta value of the stock is 1. Anything above 1 is risky, and below 1 is seen as much safer. Investing in sound companies with a good track record may be a starting point. Investors also have to look at the bigger picture of is the product industry in demand. Another area where casual investors can perhaps beat the market is by being ahead of the market to a certain extent by buying stocks of companies that have low gearing levels as well as having a net cash position.
Should the balance sheet of the company show a large level of property asset holding as well as having a positive cash flow, there are opportunities to find lowly rated stocks that have turned their business around is considered as buying a stock ahead of the market. Areas of interest would include timing decisions in the oil market and in particular stocks that have a level of exposure to the southern north sea oil and gas exploration and production, property companies, some mining shares are also good for day trading at certain price levels. But also being able to read into the political news also helps to effectively guess the future thinking of government policy. For example these G20 meetings one of there goals maybe to discuss climate change, which gets my thinking in terms of renewable energy source development and therefore I consider buying stocks of companies that have a good reputation with the government in having built and designed a bio fuel plant.