3 Things Every Investor Should Know

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Three Secrets for Successful Investing

There is a foundation of knowledge that investors need to know to understand how the stock market really works. But there are three main secrets that every investor must know if he or she expects to make the most profits and avoid heavy losses. These secrets are known by some of the professionals on Wall Street, but they are not known or understood by most stock brokers or financial advisors, and they certainly are not known by the average investor.

1.  The Stock Market Follows Regular Cycles That Offer Clues About What Is Coming Next

Let me ask you a question (and no looking it up on the internet): Can you tell to the minute what time the sun will rise tomorrow morning? How do you know the sun will rise tomorrow? Do you have a crystal ball? We know the sun will rise tomorrow morning because the sun follows a regular cycle. You may not know to the minute when the sun will rise, but you know more or less the time it will peak over the horizon.

Let me ask you another question: We know that the sun rises in the east, but will it rise due east (where you live), or does it come up a little to the north or south of due east? I don’t know the answer, and that’s not the point. The point is, you know from experience that the sun will rise more or less in the east at approximately a certain time in the morning. This is a good analogy for stocks.

The stock market also follows regular cycles (of course not exactly regular like the sun). Nevertheless, if you know what to look for and understand the cycles, you can anticipate the market’s next move. It is no different than if you were camping and didn’t have a watch with you. If you wake up and see the light growing in the east, you know it won’t be long before sunrise.

There are specific economic and technical indicators that the stock market follows. Stocks follow the economy, and if we know how to forecast the economy, we can forecast the direction of the stock market. When certain events happen, they show up on the indicators and the stock market follows.

There are others who understand how this works.

Yale Hirsch

Yale Hirsch said:

Many investors agree that no one ever really knows which way the market will move. Nothing could be further from the truth. We discovered that while stocks do indeed fluctuate, they do so in well-defined, often predictable, patterns. These patterns recur too frequently to be the result
of chance or coincidence…..  — Introduction to The Stock Trader’s Almanac, 2005 edition, page 4.

The bottom line is, if you understand and can anticipate market cycles, then you can buy near the bottom and sell near the top before the market crashes.

2.  Principles of Successful Investing Do Not Change

The same cycles have been going on in the United States for decades and probably longer (some records only began in the United States about 100 years ago) . The same principles of investing have not changed and will never change. We teach the same principles that work today regarding when to buy and sell stocks. They are the same principles that Baron Nathan Rothschild used to amass his fortune in England in the 1700’s before there was a stock market in the United States.


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Warren Buffet said:

The basic ideas of investing are to look at stocks as businesses, use the market’s fluctuations toyour advantage, and seek a margin of safety. That’s what Ben Graham taught us. A hundred years from how they will still be the cornerstones of investing.

3.  Almost All Stocks Move In The Same Direction

Nearly all stocks go up together or down together over time. Over 90% of S&P 500 stocks are up from 2009-2015 — over 90% went down from 2007-2009. Why? Stocks don’t move in a vacuum. Market participants look at other stocks, their underlying companies, and the economy as a reference point. When market-leading companies like Microsoft or IBM or Disney or Wal-Mart are strong and growing and their stocks are climbing, they influence other stocks climb also. This is captured in the saying, “A rising tide lifts all boats.”

Of course, not all stocks will follow the trend. Some stocks just sit there no matter what the rest of the market is doing. Whether other stocks are going up or down, they just sit there like a lame duck. Sometimes a company will have problems even if most other companies are growing (lately Research in Motion comes to mind). At times you may even see a stock going up while the rest of the market is dropping. But beware — this is the exception and not the rule! The vast majority of stocks move up or down together.

For example: from the low in the stock market in September 2002 to the October 2007 high, 28 of 30 stocks in the Dow Jones Industrial Average went up (Wal-Mart and Pfizer both dropped). 93% moved in the same direction. Would you rather take a risk with the odds in your favor or with the odds against you? This is known as top-down investing: seeing what the overall market is doing before you choose individual stocks. And I highly recommend doing it.

The key to making big profits in the stock market is this: if you can forecast the market correctly, you will make money no matter what stock you pick. If you learn how to pick the right stock, you will make more money. You will be able to get more aggressive knowing when the time is right, or to lessen your exposure to stocks, knowing the market is near the peak. Fortunately, we also know which stocks to buy at the right time to make bigger profits.

I am starting this company to share with the world what I have personally discovered and that I know works. The stock market really can be predicted in advance. Isn’t it worth the investment to make greater profits for the decades to come? Or would you rather continue investing the way you have been? I personally guarantee amazing results.


Gregg Killpack
Market Timing University, LLC.
Salt Lake City, Utah