Apprenticed Investor: There Are No Shortcuts
I bet that over the course of a year, I can outperform most people's favorites by 20% by using only techniques discussed in the Apprenticed Investor series, such as stop-losses, money management, position-sizing, etc.
The point of this exercise is to demonstrate that stock selection is far less important to performance than a host of other factors. The overemphasis on stock-picking permeates the financial media. It's easy to see why. It has a good story line, an inherent dramatic conflict. It lends itself to the horse-race-type coverage that's so easily done. Plus, it's easy for readers to comprehend: Buy this, don't buy that. You can understand why the media and investors overemphasize it.
But the fact remains that regardless of the importance put on stock selection, most investors have underperformed the market, despite, I may add, recently going through the greatest bull market in history. That should raise serious questions to those whose sole emphasis is stock selection.
Consider how many fantastic stocks people owned in the late 1990s: Cisco (CSCO), EMC (EMC), Dell (DELL), Yahoo! (YHOO), Amazon.com (AMZN), Intel (INTC), Microsoft (MSFT), Qualcomm (QCOM), Juniper (JNPR), AOL, Iomega (IOM) -- the list goes on and on.Yet despite these marvelous stock selections, many people, probably most, did not do all that well. I would even hazard to guess that many holders of these terrific stocks ultimately lost money on them. Where's your stock selection, now?
Better Investing Through ReadingNext week, we will discuss several investment-related books you should be reading. I will put together what amounts to a full course offering. It should take you several years of study to complete. That's right, years. While some people would like to convince you that they have uncovered a shortcut, the overwhelming evidence -- painstakingly acquired through decades of investing and trading -- is this: Forget the magic formulas and the "get rich quick" come-ons: Investing is hard work. If the market teaches us anything, it is that there is no free lunch. You don't get something for nothing. Be wary of any book that suggests otherwise. Please note that due to factors including low market capitalization and/or insufficient public float, we consider Iomega to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV