Everyone has a strategy for beating the market, and yet most all of the strategies offered for sale don’t beat the market, and most all of the mutual funds we offer don’t beat the market either.
Here are some ideas:
1. Don’t try to beat the market — try to develop strategies that provide for a reasonable return without too much downside risk. Third-party managers like BTS, Hanlon, Foxhall and SignalPoint come to mind. If nothing else, they can be used as bond alternatives for 40-70% of investible assets.
2. Don’t spend all your time and money chasing the rainbow. Always ask this question: If the strategy I’m buying from Individual X is so good, why isn’t he or she using it to make zillions? In other words, why do they need to sell it to me? If you are a long-term investor, invest in good companies with transparent management, good earnings strength for the future, and low P/E ratios. When you invest in the market when P/E ratios are low you are likely to make money for your clients; when you follow the herd and invest when P/E ratios are high you are unlikely to make money.
3. When experts say that it’s easy to make money in the market, they mean this: Be rational; in other words, buy when P/E ratios are low, and sell when they are high.
4. Think of the market as an ongoing organism and try to take advantage of its life cycles. Be like Buffett — be rational.
That’s all, folks. Have a great week!
For more blog posts from Richard Hoe, click here.