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- 5 Principles to Beating the Stock Market in 2024
5 Principles to Beating the Stock Market in 2024
Easy, but requires commitment
Is it possible for a regular person with no Wall Street experience, equipped with just a retirement (or Robinhood) account beat the market? Yes. But under certain conditions.
The odds are stacked against the regular person. There are big investment firms like BlackRock and State Street that command a significant portion of the exchange.
There are hedge funds with huge investments in tech to get ahead. They are always looking for some arbitrage opportunity. And then, there is the fact that 10% of the wealthiest people in America own over 90% of all stocks.
Those are some steep odds. And if you decide to compete with them with your Robinhood account, you will lose money. Everybody feels like they are a genius when they are trading. They make money on a few trades and think that they are gifted.
But when reality sets in, it is very ugly. So, the first thing I'd like to tell you here is this:
If you think you can make money by day trading without being a trained professional, I can't help you. And you will lose eventually.
Anybody can make money in the bull market. 2006, everybody was making money. 1999, everybody made money. 2020/2021, everybody made money. That isn't hard.
The hard part is surviving the tough years. And I think 2024 is going to be a tough year for the stock market. And I can show you how to win, as an investor (not a trader).
Here are the 5 principles:
1. Everyone Giving Free Advice about Stocks is Promoting their Positions
If you are not paying for the information, it's probably a sucker. It doesn't matter if it is on TV or Twitter or Livestream or Telegram Channel. They are shilling you what they already own.
Now, this doesn't mean they are lying or manipulative. Sometimes they are telling the truth. Sometimes their narrative is working. But the reason they are telling you that is to "pump their bags". They want you to buy into what they have bought into.
It is with the small players, it is also with the large players. Recently, Jamie Dimon (JP Morgan CEO) called for bitcoin to be banned in a Senate hearing. Only for BlackRock to reveal that JP Morgan is on board with them on their ETF application.
If you think you will get a hedge from these experts freely, you are grossly mistaken. Following them is often harmless in the bull cycle. But following them in a year like 2024 is going to be painful.
2. Don't Use Leverage Liquidity
Leverage allows you to make remarkably more from what should have been a simple gain. For example, if you made a 5% gain, adding leverage could make that a 50% gain.
Leverage is when you bet with more than the money you have. You have 100 usd but you place a bet with 1,000 usd. If you make a 5% gain, that is 105 with your original capital. But with the leverage, the same gain makes your new capital 150.
Why is this too dangerous for the average person? It is because if you make losses, you can lose more than what you have. With the same example, a 5% loss would mean your capital is now down to 95. Meanwhile, with the leverage, your capital is down to 50.
That example is just a 10X leverage. There are avenues for 100X leverage and even higher. The risk for a regular person doing this is just too much. Stay away from leverage - 2024 is not a bullish year.
3. The More Trades You Make, The More You Lose Money
The "investing" platforms are not designed to help you make money. They are designed to help the companies who own the platforms make a profit.
Robinhood isn't there to help you make money. It is there to let you make as many trades as possible. These platforms make money from fees. And in most cases, the more trades you do, the more fees you pay.
While the fees seem small, they quietly erode your money.
4. You Won't be the Fastest
One way to make a lot of money in investing is to be the fastest person to jump in a bull run and one of the first to jump out before the slump.
However, if you think you can be faster than the thousands of traders on Wall Street with sophisticated tech, you are dreaming. Every time I see people try to play the fast game, they have been punished by Wall Street without fail.
The big banks and investment firms make money. The rest of the public got played a fool. And they will suggest they are buying when they are selling. These people are experts at getting the public to do what they want the public to do. Sometimes they get screwed too, but not often. And very rarely by the public.
Admit that you can play the "first to arrive" game with Wall Street. You will lose always.
5. The Secret is Asset Allocation, Not Risk Management
It took me a while to figure this out. "Risk management" is often a diversion term to manipulate people. For example, they say things like buying bonds to balance the risk of owning stocks.
Meanwhile, anyone with investing "common sense" knows that nowadays bonds and stocks rally and crash together. I don't encourage this at all. It is a setup to be a sucker.
The winning game for a regular person is all about where you are, what you buy and when you buy it. I don't give stock tips or anything like that. I give truthful information to make a decision about what you own or what you’d like to own.
I once had someone who liked bonds (which I don't like, by the way). When the front end of the yield curve was way above 5%, I suggested that could be a good move instead of staying in cash. That turned out to be a smart move.
I don't tell you what to buy or not to buy. I tell you when it's time to make a decision on something you own or would like to own. All of that update drops for the premium subscriber.