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How to profit from shares
Can you beat the market?
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So, you want to try your hand at stock picking? If that's the case, then you'll have only one aim in mind -- to beat the stock market.
But let's get something straight from the start.
Consistently beating the stock market over the long-term is very difficult.
It's a fact of investment life that around 80% of all actively managed funds undershoot the stock market average over the long term. Given that most professional fund managers, with all their research, industry contacts and experience, can't consistently beat the stock market, what chance is there for the novice Fool?
Don't believe that just because the professionals fail, the amateur stands a better chance. It just isn't the case. While the Foolish investor is more likely to take a longer-term view than the typical fund manager, there's no guarantee he or she will be able to pick the right companies at the right price.
Face it. Successful stock picking will involve a lot of time, effort and anguish.
Ask yourself these questions before embarking on any market-beating quest:
- Can I devote a significant amount of time to investing?
Golfer Gary Player once remarked "the harder I practice, the luckier I get". The quotation is tailor-made for investment. The more you read, research and learn, the better investor you will become. Successful stock picking requires considerable dedication and effort. If you're not inclined to put in the required time and elbow grease, you'll lose money.
- Do I want to learn about the intricacies of accounting and valuation?
Do you wish to get your head around some of the complicated figures at the back of an annual report? Do you want to get a grasp on how to value a company's share price? A lack of inclination to become familiar with either will severely restrict your investment performance. And a lack of inclination to become familiar with both will mean investment ruin. Those with a fear of numbers need not apply.
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