It is a well known fact that the majority of those who dabbles in the stock market is not likely to do well. As such, it will be good to invest in an index fund so that their returns is not likely to underperform the stock index. For those who wish to outperform the market instead, they will need to possess some edge which the majority of the market do not have.The key here is that they must be doing something which the majority of the market are not doing. Now so what are some of the things that the majority of the market do that they think will help them in outperforming the market ? Some examples that help the majority of the market in making the decision to buy or sell a stock are given below.
- Analysts' recommendations on stocks
- Release of news which the market thinks that will affect the prospects of a company
- Rumours
- Perceived prospects without doing any thorough business analysis
Now if the majority of the market underperforms the stock index, then the above examples are some of the things that you should not be doing when it comes to investing.
Now what are some of the investing edges or advantages which the majority of the market do not possess ? Some examples are given below.
- Access to 1st hand information which the market do not possess yet
- Taking a contrarian approach
- Knowledge of investment tools
- Doing a thorough business analysis
Thus, if you wish to invest in the market, think about what is the edge you possess that can enable you to outperform the market and avoid doing what the majority of the market is doing.
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Thanks for sharing such great post, according to me make a proper analysis of sectors where you want to invest and also see the compatibility and the profitability of that sectors is the perfect way to invest. The professional attitude of investment is like you should invest for long term and don’t follow the crowd. For more details on how to invest in the stock market refer http://www.prime-targeting.com/tips-on-how-to-invest-in-the-stock-market/
ReplyDeleteI agree and perhaps someone should tracks the performance of analyst recommendation to prove this. However, I still like to occassionally look at analyst report for catalyst or industry I have no clue in.
ReplyDeleteCurrently, I am trying to take a contrarian view of analysis and trying to only look at the troubled company instead of good company. I hope I can slowly learn the various issues that can lead to a company from a great IPO to a troubled stock.
Hi Thein Rong,
ReplyDeleteAnalyst's reports are useful for me with regards to the statistics and the numbers they are providing. Similarly, it is also a good start with regards to an introduction to any unfamiliar industries.
All the best to you in taking this approach. I do think this approach can work if you are buying into a good company that is in some kind of resolvable trouble.
Kay