BECOMING A CONFIDENT INVESTOR

Confidence comes mainly from experience and education. To become a confident investor, one needs to understand the realities of investing in the stock market. One needs to understand that the stock market is very irrational in the short term. All markets overreact to both positive and negative news. As long as human beings are involved in the markets, there will be periods of excessive swings in both higher and lower directions. A confident investor understands this and expects this.

You can be a victim of this irrational behavior, or you can use it to your advantage. Our Beyond Buy & Hold system is one way of using excessive market volatility to your advantage.

Becoming a confident and secure investor is a process.

A confident investor:

1. Is disciplined and unemotional in their investing – they avoid the pull of greed and fear.

2. Has the right expectations – they don’t expect 20% or 30% annual investment returns and they also don’t settle for measly gains of 5% or 6% per year.

3. Is not a gambler – they avoid the “no risk – no reward” mantra. They know that big risks can mean big losses and the proper long-term investing strategy results in huge gains.

4. Has the proper time horizon and is patient – they don’t put any money they might need to spend in the next five years in the stock market. They are only investing for the long-term.

5. Understands WHY the stock market will always go up in the long term – it is not enough to have the knowledge of the stock market’s long-range performance. To have the right investing conviction, people need to know the reasons behind the performance.

Confident investors have the knowledge that the broader market of large cap stocks will increase by 9% to 10% per year in the long term. Anything is possible in the short-term. Markets could drop by 40% from their current levels and they could increase by 40% from their current levels in the next 12 months. None of that really matters to a confident and secure investor. Confident investors know that they will not be taking their money out in the next several years, so they are only focused on long term results.

How can we be so confident that the stock market will continue to appreciate at a over 9% annual rate out into the future? The answer is because we are so confident that the biggest and best companies in the world will continue to increase their cash flow by 9% per year. The companies in the S&P 500 have produced annual profit increases of 8.7% per year for the last 100 years. Remember that a 9% increase in annual profits is not a stretch for most companies in the long run. At the companies I ran, we never had an annual profit goal of less than 10% above the previous year. Investors demand that from their management teams.

Our entire economy and our entire society are dedicated to ensuring that these companies grow and flourish. Our government depends on the tax revenue they produce. Society depends on the jobs they produce. Investors depend on the profits they produce.

But what if our system collapses? Given our political and societal challenges, this seems like a fair question. It could happen but I would expect any system that follows this one will be dependent upon those companies succeeding. But more importantly, if you are worried about a system-wide collapse, you absolutely need to be following along with our system and approach. We can’t avoid small, short-term losses with our system, but we would get your money out of the stock market long before the major damage would be done to your investments in the event of a systemic collapse.

In summary, to become a confident investor you need to focus on patience, discipline, and knowledge – not because we say so but because we plan to help you learn about the benefits of this approach. This current period of market turbulence is a test for what kind of investor you are. We want to help you pass this test and all future tests.

A confident investor:

• Has a sound investing strategy that puts them in the best long-term investments,

• Has a strategy that avoids catastrophic losses in major bear markets,

• Doesn’t flinch when markets are down,

• Doesn’t get too excited when markets rise significantly,

• Doesn’t pay attention to the sensational market news of the day,

• Doesn’t get swayed by the “fear of missing out” on the next big investment vehicle,

• Focuses only on the long term.

If you are not already a member of our Market Signals membership, click here to learn more.

Happy Investing,

Phil

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Disclaimers *The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.

Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.