Mon 7 May 2007
Can you beat the Stock Market?
Posted by Robin Bal under Extra Earnings , Investing , MoneyMatters , Personal Finance , Risk , Stock Markets[6] Comments
…unless the stocks you own ARE beating the market!
There is no way on earth you could ever beat the market if the stocks you hold are not keeping up with the market. And hopefully, staying ahead of the market.
But yet, that’s what lots of people try to do. They’d rather keep all the dogs in their account and maybe “take a flyer” on one stock, hoping for a miracle. It’s like trying to win a Derby horse race with your Donkey. It just ain’t gonna happen.
But hey, maybe you don’t want to beat the market overall. Maybe you just want to own the BEST semiconductor stocks, or the best retailers, or the best utilities.
Seriously, how would you even KNOW if your stocks or mutual funds are beating the market, or are the best names to own in their group? Well, I can tell you this…the best indicator I’ve ever seen in twenty-plus years in the business has been relative strength. What is relative strength? It is simply the measure of how your mutual fund or stock is doing, compared to a group of other stocks, funds or indexes…or the market overall.
Perhaps you want to compare Intel with other semiconductor stocks. Maybe you want to compare Microsoft with the S&P 500 Index. Maybe you want to compare your mutual fund against the Dow Jones Industrial Average or the Standard & Poor’s 500 Index.
This is a very easy calculation. Here is how you do it: Simply divide the price of your stock or mutual fund against whatever yardstick you choose. You’ll get a fractional number as the result. But slide the decimal over so you can work with whole numbers. Then we begin plotting that result daily on a point & figure chart.
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