There are three massive problems for both new and experienced investors today.
I’ll start with #1:
Have you ever read a “how to invest in the stock market” article? I have. When I was first starting, I read them all — or at least any I could get my hands on. The blog article would read like this:
“Read Benjamin Graham’s Intelligent Investor and then read Warren Buffett’s letters.” ― Investing Blog
[ Picture a montage of Rocky training for his next fight, or in this case, Leo reading a new investing book ]
As I finished the sage advice, my once extreme excitement turned sour as I hit the proverbial brick wall. Where do I go from here?
So that’s problem #1:
Investing resources tell you where to go, but they rarely give you step-by-step guidance on how to get there!
Problem #1 may provide insight into why problem #2 exists. And that leads me to problem #2:
90% of investors have no idea what the heck they are doing!
Want proof? The S&P index beats the majority of professional money managers.
Read that again and let it sink in…
That’s like paying a plumber to fix a leaky pipe, making the leak worse, and then handing you a hefty invoice on their way out the door. Getting paid to make things worse? That’s insane!
Want more proof?
I was at an investing conference recently, and a prominent hedge fund manager stated that every stock looks expensive. I asked him the yardstick he used, and he said he’ll only buy at a 12x multiple.
Without going into the details on why a multiple will adjust due to risk-free rates or which multiple he was talking about, it was clear to me this person didn’t have a strong fundamental background on the technical details of valuation — although I did admire the price discipline. And problem #3, investors need to broaden their toolset. We’re in the information age. Why in the world are you not using computers to help make your investing decisions? I don’t mean just using a screener, I mean actually having computers analyze what, when and how much to trade.
So you want to learn how to invest or improve your performance in the market?
As promised, here’s something actionable: You could quit your job as I did so you could study the stock market, investing and valuation, statistics, and quantitative methods 24/7/365, or you could keep your day job and read this blog. With that being said and without further ado:
Welcome to Analyzing Alpha
A blog that helps both new and experienced investors beat the market by getting to the truth of what works and what doesn’t… all without quitting their day job ;).
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