There is no secret to investing, only work:
The investor's job is to make the market efficient by discovering market's inability to perform as it should and then investing in such a way to make the necessary corrections and bring it back to towards being efficient. The rewards are great if you are able to do so.
But it takes courage and tenacity and an inherent belief that your hard work and calculations and forcast are correct since you will often have to invest contrary to market trends, and alone. Buffett put it this way: when your stock goes down and you think it should go up, then buy more.
Of course, if you are a day trader or trend follower, there is no inherent belief nor courage nor calculations nor sound forcasts, just luck based on prior price trend lines to give comfort to a prediction based on creative imagination, hope, fear and greed with enought nonsense calculations and theory to convince the fool to part from his money, and the occational rewards to maintain the gambler. In the long run, there will be much money lost since the knowlegable based on work of calculations will be winning while the ignorant will be loosing.
If a stock is presently undervalued by the market according to a knowing evaluation, buy and buy more if it further goes down; if it is above value, sell and go short if it goes higher. The market will eventually discover your sound analisis, return the price to its efficiency and follow you, the money you earn will come from the less knowlegable and crowd followers who bought. In hind-sight they will learn that they bought too high and sold too low moving on to another lazy investment; meanwhile their money will be your money.
Investing is really that simple.
Joe |
