It is so easy to get caught up in the complexity and exuberance of the stock market, the Beta, the CAPM, the hot tip from the mailroom guy, the biotech company which has just gone into the first phase of clinical testing for it’s cancer cure, the company that has just created a new solar power plant.. The list goes on and on. Everyday you will get a new hot tip, or read about a new biotech company, everyday you will be tempted to try your hand at the stock market roulette, but why would you do it? Knowing that 90% of all people who play the stock market this way lose, why would you want to place your money in such high risk companies that you know nothing about?
I’m going to say something very controversial here, something that will lead many to leave this site and even possibly burn their computers for having read it.. Here it is, be prepared.. The Stock market is logical! Making money on the stock market is easy.Whether we are in a bear, bull or range bound market[1] money on the market is easy to make.
Not by using complicated methods such as shorting a stock, or using complicated options, or any other complex super method.. It is easy to beat the market simply by buying low and selling high. Doesn’t matter what the overall mood of the market is. The market will always fluctuate because one major ingredient for the stock market is the human emotional psyche. Or as the great Benjamin graham puts it, imagine you have a business partner called Mr. Market
“Mr. Market is very obliging indeed. Every day he tells you what he thinks your interest is worth [in the company] and furthermore offers either to buy you out or to sell you an additional interest on that basis. Sometimes his idea of value appears plausible and justified by business developments and prospects as you know them. Often, on the other hand, Mr. Market lets his enthusiasm or his fears run away with him, and the value he proposes seems to you a little short of silly”[2]
Or in modern terms, Mr. Market is an utter manic-depressive lunatic, some days he is very optimistic and is willing to pay huge sums for your half of the business, while the very next day he can be extremely depressed and can’t give his share away fast enough, even at substantial loses. Sound familiar? We see it everyday! One day the stock market is optimistic as if the sky is the limit, then the very next it can sink like the titanic! Talk about manic-depressive.
This website is not going to have an amazing amount of charts and statistics, that is not the purpose of kennethshaw.se, this site is for those who simply do not understand the stock market, who believe it is an imaginary casino where people can through in huge amounts of money and possibly win or lose. This site will try and bring the logic back, or at least give the average investor a little more confidence when making investments on the stock market. Kennethshaw.se is not intended for the investment professional, but instead for the average investor. And hopefully when after reading my posts you will not have the need to run for the hills every time Mr. Market is overly depressed.
Summary:
- Most people fail to beat the stock market, including investment professionals.
- Efficient market hypothesis, Modern portfolio theory and Greek letters will not be used anywhere within kennethshaw.se.
- When logic is used, beating the stock market can be easy no matter what the market conditions are!
- Kennethshaw.se is for the beginning investor who thinks the stock market is a complex ball of confusion.
- Mr. Market is utterly insane!
Suggested Reading:
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[1] One of my favorite books on stocks and investing creates the term Range bound market, which in essence is a market that goes neither up or down but simply flat. Usually falling between a bear and bull market. Look it up yourself as this is a great book. Active value investing by Vitaliy N. Katsenelson
[2] Graham, Benjamin The intelligent investor, Collins business essentials, revised 1973. Pg. 204-5
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