We had an interesting meeting last week.
It was about money… and how to make a whole lot of it through investing.
It’s a big part of the Manward mission (as if you couldn’t tell).
The two men we met with would best be considered traditional investors.
They did some short-term trading, for sure. So they aren’t the buy-and-hold types. Their trades start with, perhaps, a glance at a company’s balance sheet. Then they may look at the company’s latest earnings report. After that, they may study the company’s competition or its product lineup.
It’s good stuff.
But everybody’s doing it.
That’s the trouble.
As we’ve said so many times… If you do what everybody else does, you get what everybody else gets.
And that’s not very good.
It’s why – despite living in an age of supercomputers and instant communications – most investors see returns that are no different (or worse) from when we used slide rules to do our investing math.
That’s why we sat down at the table with these two smart gentlemen.
We aimed to tell them our side of things – why antique methods of investing no longer work.
There’s a better way.
Who Are You?
To understand it, we must understand that there are just three types of investors. It’s what we’ve learned after nearly two decades of talking to and coaching investors.
There are the traditional buy-and-hold folks.
They’re easy to spot. Because they’re praying to the stock market gods so much, their pants tend to have holes in the knees.
These are the investors who hope they’re buying a good stock and then spend the next three decades praying it’s still there when they need to cash out.
It works for most folks. But then again, most folks depend on the government for their retirement.
Then there are the traders.
These are the wise folks who are active with their money and are working to control their own fate.
Most of them, as we mentioned, focus on a company’s fundamentals.
It’s the way we were taught. We still have dog-eared copies of Benjamin Graham’s books on our shelf. If we’re buying a share of a company… we need to know what we’re buying. Right?
But, again, if everybody’s doing it…
A Different Take
If you’ve followed the money game, you’ve surely heard of Mark Cuban. He’s a billionaire investor who knows a thing or two about buying low and selling high – really high.
What are his thoughts on balance sheets… earnings reports… and all those things the Wall Street crowd pretends they can decipher?
He’s got a unique take…
“Fundamentals is a word invented by sellers to find buyers… metrics created to help stockbrokers sell stocks and to give buyers reassurance when buying stocks.”
He goes right for the neck.
But he’s not wrong.
The hope-and-pray crowd has historically beaten fundamental portfolio managers.
Despite Wall Street’s constant attention to earnings reports and the analysts who make careers out of selling their thoughts on them… few folks are getting rich by playing the numbers.
We shared that thought with the two men we met with, and you’d have thought we kicked their puppy.
We had walked into the Church of Wall Street and washed our greasy hands in their holy water.
But don’t worry. This blasphemous tale has a happy ending.
We didn’t tell them not to buy and hold. After all, we’ve got our share of worn-out pants.
And we didn’t tell them not to look at fundamentals… that’d be silly.
But we did tell them to diversify their strategy.
Just as investing lore tells us to diversify our holdings (some big, some small, some foreign, some domestic), we must diversify our strategies.
It’s a philosophy that we can proudly say has found a lot of followers.
And those followers fit into the third category of folks we mentioned above.
They buy and sell based on technical analysis.
The strategy is not what it used to be.
Forget what you heard.
Think about what smartphone technology has done to communications. That’s what the latest technical trading technology has done to investing.
With a few clicks of a mouse, we can go through more data sets than ever before. We can spot the market anomalies that fundamental investors used all those numbers and all that accounting jargon to uncover.
That’s the key.
Too many folks think technical investing is about spotting complex (or silly) patterns in charts.
We laugh when we hear of “cup and handle” patterns, “head and shoulder” setups or “triple bottoms.”
We know lots of folks who use these ideas… but we don’t know anybody who uses them well.
Instead, we must use technical analysis to uncover what the methods above have failed to do.
We all agree that the key to investing success is buying cheap assets and selling them after their value climbs. Put another way, we must buy assets that others have undervalued and sell them when they become overvalued.
Using that lens, technical analysis has a whole new use.
With today’s supercomputers, we can scan the markets for the multitude of clues that tell us something is temporarily cheap.
The stock might be undervalued because a big hedge fund just changed direction and had to dump more shares than buyers could pick up.
The stock might be cheap for a day or two because an earnings report hit during a bad day on Wall Street and the sinking ship lowered all boats.
Or, in a twist of fate we see all the time in the small cap realm, a slug of sellers just happened to decide to sell at the same time.
It happens. We’ve seen it all.
Until recently, the ability to scan for such anomalies with any sort of speed or breadth was not possible.
Then again… neither was searching for a recipe on your phone.
We’re in a new realm of technology.
That means we’re in a new age of investing.
If you’re not taking advantage of it… you’re missing out.
Spread the word.
P.S. If you want to see how I used the latest technology to unleash gains that blow Wall Street’s figures out of the water, click here. Using this strategy, investors could have seen gains of 89% per day on average. It’s all thanks to brand-new technology. But you’d better hurry. I’ll be forced to shut this link down tomorrow at midnight. Click here now.