Friday, June 18, 2010
The Dealers Edge
The cards are stacked against you
Just like the 6 deck black jack tables at a Las Vegas casino
They have an arsenal at their fingertips
Billions of dollars in media and advertising
IQ's that would make Einstein jealous
Education at the best schools on the planet
So many Nobel prizes I have lost count
They have armies of mathematicians, scientists, computer programmers, attorneys, accountants, analysts etc.
More PhD's than you can shake a stick at
They use words like efficient market theory, beta, EBITA, and stochastics
They use artificial intelligence modeling on the fastest super computers in the world
Feel inferior yet?
That's by design
You see if you feel inferior, then the dealer maintains his edge
The more you don't understand, the more money the dealer makes
This is the dealer’s main weapon, its edge
Who's the dealer? Wall Street
The dealer makes you think it's easy
Have you seen those E Trade commercials?
Investing is so easy a cute little baby can do it
Give me a break
If it's so easy, let me ask you how is your self directed portfolio stacking up these days?
That line of BS is fed to the 80 million Americans daily
Through RSS feeds, real time business news, to real time investment quotes on you cell phone etc.
So much investing information it’s overwhelming and confusing
Information overload just sharpens the dealer’s edge
So the question is simple
Can the individual investor beat the dealer’s edge?
Without a doubt, I made it my mission in life to do just that
I often get asked how I consistently beat the markets
One heck of a lot of time and effort
Did you expect me to say it would be easy?
Did you expect me to say that all you need to do is to log into a very special website, check out this one indicator, open an account, and turn $22 bucks into 1.4 million in less than 30 days?
Yeah I got three of those ridiculous emails today as well
And the dealer just laughs and sharpens his edge
What is it going to take to beat the dealer?
Well, if think you're going to show up to gun fight with a mechanical pencil and win you might as well turn your money over to a professional right now
There is no magic potion, no pill, no indicator, no guru that can get you there
If you're not willing to roll up your sleeves and put the work in, you’re finished before you even started
The good news: if you are willing, the dealer can be beat and here’s how
Step 1- Get yourself a good library of investing books
My top 5 favorites are: How to Make Money in Stocks by William J. O'Neil
101 Investment Lesson from the Wizards of Wall Street by Michael Sincere
Market Wizards Interviews with Top Traders or New Market Wizards Conversations with Americas Top Traders by Jack Schwager
One up on Wall Street by Peter Lynch
Any book by John Murphy- If you want all the details read Technical Analysis of the Financial Markets. If you want the cliff notes version read The Visual Investor
These books are easy to read and will give you a solid foundation to make informed investment decisions. Remember this is just a starting point
Step 2- Find an investing methodology that works for you
There are countless ways to beat the dealer at his own game
Through many years of effort I have found a system that works for me
What works for me may not work for you
If you look at the investment methodologies of the greatest investors, you will be amazed that each one of the greats invests differently
Some like to dive into a company’s financial numbers, others like statistical analysis, some like charting, some like growth companies and still others like value investing
All these approaches when put into the hands of a passionate and skilled investor can be successful
You must start sharpening your own edge, honing your own skill, finding your own niche
Find what works well for you and work hard at making it better
Step 3- Deliberately choose who and what you get your information from
Late night stock picking infomercial man probably is not the best source of good investing ideas
One place to start is the authors of the very books you just read. The amount of resources on William O’Neil's website alone, is amazing
I have posted a lot of good resource links on my website here
Don’t let Jimbo on CNBC tell you what a great investment this or that stock is
Do your own analysis, how do you think the company is doing? How are the fundamentals? How are the technicals?
If you can’t answer these simple questions then the dealer has you right where he wants you, confused and in his sights
Go back and read more, study the markets, find out what successful investors do and replicate
Don’t stop learning…ever. Trust me, the dealer never quits
He is always dreaming up new ways to take money out of your pocket…can you say CDO’s?
So it comes down to this, I commend you for your effort
Successful investing is a work in progress
You can beat Wall Street
You can beat the dealer’s edge
You just need to turn off the noise, learn the fundamentals, and put in the work
And when you get the opportunity to beat the heck out of the dealer be sure to drop me a line, I would love to hear about it
Until next time…be Cents-able.
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