Every day the “experts” tell us the reason why a certain stock (or the market itself) is going up or down. Trying to make money in the stock market by picking a direction is daunting. Even if you pick the right direction, other concerns pop up. When is the right time to take profits? When is the right time to take losses? How much capital is the right amount to use for each trade?
If you track most of these “experts” who claim to foresee a market direction, you’ll see that they do not reveal the results of their total portfolio. This in itself, is proof that there is no “expert” who can pick a direction and profit from it on a consistent basis.
I was excited when a found a site that shows total portfolio results. It’s found at Covester.com. Covester posts its results on 54 funds. It shows actual portfolio management and the actual results that their professional money manager achieve. As of today (March 21, 2016), how many of these funds would you guess have been profitable over the last 365 days?
The answer is a surprising 6 out of 54 ! That’s only 11% of the funds. Approximately 9 out of 10 portfolio managers are down over the last year. For them, picking a direction didn’t work. If you know of any other sites where actual portfolio performance is tracked please post a reply so I can check it out. I would be surprised if the results were not similar.
Through the years, I have studied the market and the research to learn that the probabilities of the market going up or going down is roughly a 50-50 chance. (Actually it’s closer to 53% of the time the market goes up, while 47% of the time the market goes down due to market drift.) I have also found that these probabilities can be used effectively when you take advantage of stock option premium selling techniques. The downside is the learning curve. However I have also seen less sophisticated options strategies create good returns.