What I learnt about stellar stock market profits….

Wednesday 19th April 2017

What I learnt about stellar stock market profits….

Growing up I took a keen interest in the stock market and would pester my parents to buy copies of the Financial Times.

They had no idea why I wanted that newspaper. They considered me caught-up in a fad that would pass.

But to my callow mind, the pink paper contained arcane code that would lead to untold wealth when correctly interpreted.

All you had to do was figure it out….

So, while other kids took their bikes to the BMX track, I was in my bedroom getting to grips with 200-day moving averages and Book to Value ratios….

  • Is consistent profit possible?

I went to work in financial publishing. And from there into business.

I met some smart people. Serious investors. Analysts. Fund managers. Brokers. Traders. A lot of people who make good money selling their advice.

I talked to them all. I listened closely. I picked their brains. I read their books and newsletters. I attended conferences, seminars and presentations.

My views changed. Nowadays I wonder if it’s possible for the average investor to consistently make profits in the stock market….

I’m not sure it is. Not the way most investors play….

Unless you’re acting on inside information, it’s very difficult….

  • The mainstream media – miles behind….

To be a profitable stock-picker, you need to be at the top of the information-food-chain. And, most investors aren’t.

Most investors buy stocks based on something they read in a newspaper or see on TV….

But what you read in the Daily Mail or hear about on the BBC’s business round-up, is old news – news that has already been acted on….

You’re looking at the pinprick lights on the rear of the bandwagon as it disappears over the ridge and into the distance.

Relying on mainstream media coverage means you’re well behind the real action….

In information-food-chain terms, you’re at the bottom of the pile. You’re the last man to know….

  • Insiders and big boys do best….

If you purchase stocks based on a steer from the mainstream media, you’re behind the game….

Insiders have already filled their bellies. So too the big players – professional investors, banks and funds with resources and contacts that out-weigh and out-reach your own.

When you read about ‘new developments’ in your newspaper, they are already factored into stock prices. Insiders and the big boys have already hoovered-up. You never got a sniff. You never will.

The only reason you can buy at the current price is because the big boys are happy to sell at that price – because it represents a profit.

Factor in transaction fees and you need to hope your timing is good and that you’re getting in ahead of some fresher development that will move prices again….

Because you missed the uplift produced by that old development you read about too late in your newspaper and which encouraged you to buy in the first place….

  • Small investors need to think differently….

If you’re buying stock in established listed companies, you’re up against it.

The playing field isn’t level. You’re up against insiders who know more. And well-resourced professionals you can’t hope to beat consistently.

I’m not saying that EVERY individual man-on-the-street buying FTSE stocks will NEVER make it pay.

One or two hot-shot investors might buck the trend. But they are outliers. The majority have no chance. The deck is too heavily stacked against them. They don’t have adequate resources to compete.

If you want to make serious money in the markets, you’re not going to do it buying the stock of the established companies the newspapers discuss. You need to do something different.

You need to play a different game. One where you have an edge. One where you have a level-playing field – sometimes all to yourself.

Try playing like Ning Wang did, for example….

  • Do what Ning Wang did….

Ning Wang bought shares in Apple….

What’s so smart about that? Everybody knows Apple is a quality holding. At least they do now….

But Wang bought his Apple stock back in 1998 – years before Apple became the success story it is today.

Wang bought Apple stock worth $3,412. Today his stake is worth north of $400,000. That’s good investing – to say the least.

Now don’t get me wrong. Not many investors did what Wang did. He put down a relatively small investment on a developing company, caught the wind and hit the jackpot. Fair play.

He played for small stakes so that his downside was limited and he produced a MASSIVE return.

But it wasn’t luck. Wang knew exactly what he was doing….

  • Wang levelled his own playing field….

Wang couldn’t be sure of his ultimate outcome, of course. There are no guarantees when you invest in a stock. Wang might well have lost money – small companies are risky bets.

But Wang was purposefully looking for investment opportunities in areas where the big boys don’t play, where the mainstream media isn’t involved and where the playing field is more level.

Wang was researching little-known and early-stage companies – small tech stocks trading for pennies but with the upside potential to explode.

Wang knew full-well that these kinds of investments are well-off the radar of big institutional investors and mutual funds.

He knew full-well that the big players are only interested in stocks with a big market cap and plenty of liquidity that makes it possible to buy and sell in volume – continuously.

He knew full well that out in the world of penny tech stocks he wasn’t in competition with huge and well-financed institutional machines.

He knew very few people were looking at all. And he knew that if he identified a promising opportunity, he’d be getting it at a basement price – well ahead of the pack.

The rest, as they say, is history. Wang found the promising opportunity, got in at basement level and was on-board and strapped-in for when Apple’s stock eventually took off….

  • Undiscovered success stories….

I’m not trying to say that what Wang did is easy. It isn’t.

Not all small tech companies with shares trading at pennies turn into Apple. Most you will never hear of again. Others just tread water and never break out. Many go broke.

But there are always quality opportunities out there. Right now, there are dozens upon dozens of small tech companies with potentially world-changing products in development. And their stock can be hoovered up for pennies – literally pennies….

Last year Tech Nation Report concluded that the UK’s digital technology industries are growing 32% faster than the rest of the UK’s economy.

In other words, plenty is happening in that sector – and it is happening faster than anything else going on in the economy right now. It is a ‘hot’ time to get involved in emerging tech.

Fact is many of tomorrow’s superstar stocks will be found today in the digital technology sector….

Digital technology is an industry sector that is going places. Plenty of tomorrow’s big commercial success stories will be found there today – still small, still growing but undiscovered and full of profit potential for early-bird investors.

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  • Plenty of risk but lots of reward….

Investing in small tech companies has the potential to deliver massive rewards. But, of course, there is also great attendant risk. Buying stocks in early-stage companies – however cheap – is not for everybody….

But I’ll tell you this….

Transport me back to my old bedroom – knowing what I know now – and I wouldn’t be asking my parents for a copy of the Financial Times.

I’d be asking instead for a subscription to a publication that investigates and uncovers early-bird investment opportunities in cutting-edge companies with the potential to fly to the moon.

I’d be putting my pennies down and looking to find the next Apple.

I’d be doing a Ning Wang and looking to make big profits by being first to the punch on tomorrow’s big success story.

That’s how you make the real big money in the stock market.

That’s how it looks from here….

I’ll be back with more next Tuesday morning.

All the best,

Dave Gibson

Money Truths