I’ve Beaten The Market With My Stock Selections, But That Does Not Make Me Special

By | October 5, 2020

I have two Roth IRAs, a Rollover IRA, a Personal 401K, and a Corporate Brokerage Account that I track. I also manage a brokerage account for my kids and one for another family member. Those two I do not track because the goals for those accounts are different. For instance, for my kids I am shooting at around 20-25% because they have lots of time to work with. The other family member is retired so that account is super safe.

Of the accounts I track, all but the Corporate Account have beaten the S&P for YTD, 1 year, 2 years, and 3 years. The Corporate Account is new so I think I get a pass on that one for now. Most of my accounts have also beaten the NASDAQ 100 index for those periods. In fact, one of my Roth IRAs has exceeded 100% return in the past year.

First of all, you could say I’ve been lucky or that the markets have gone up tremendously in the past year, and I would say you are right. But the idea that my results are my own and cannot be matched or exceeded is completely false. Anyone can do as well or better. It’s just a matter of the following factors:

  1. Invest in stock of a small number of different companies. 10 is a good number.
  2. Be more concerned with the financials of the companies you pick than anything else.
  3. Ditch your weaker picks *based on company financials* and keep your winners if and until they have issues with their financials. Check the financials of your 10 companies regularly. i.e. Monthly.
  4. Be less concerned with a having a balanced portfolio and more concerned with picking the best of breed stocks.
  5. Ignore the stock market efficiency theory and buy at good prices based on discounted net present value.
  6. Ignore any of these factors if you have a reason why you are ignoring them (and can potentially document them), but make sure you pick and buy stock with your eyes wide open.
  7. Don’t let your emotions get the best of you. Tough out the down markets without selling. Don’t get giddy and buy a ton on up markets. You should probably do the opposite.

Be ready for a slow start to your investing career (or pasttime). Make sure you start small and grow your nest egg. You will find that you can win over time.

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