3 Fundamental Facts About Investing In The Stock Market That Nobody Likes

Dr Watson Goh By Dr Watson Goh, 8th Apr 2011 | Follow this author | RSS Feed | Short URL http://nut.bz/152_f-vz/
Posted in Wikinut>Money>Making Money

There are two famous street in the USA. One is the MAIN Street & the other is more commonly known as WALL Street. When it comes to investment strategy however, they are miles apart. In WALL Street, all these top bankers when asked how they are going to retire, they will always tell you that they will work the trading floors hard and trade through multiple trading channels, for about 5 to 10 years, then retired.

However, for the general public on the MAIN Street, their reply.................

KEY STOCK INVESTMENT TRUTHS

There are two famous street in the USA. One is the MAIN Street & the other is more commonly known as WALL Street. When it comes to investment strategy however, they are miles apart. In WALL Street, all these top bankers when asked how they are going to retire, they will always tell you that they will work the trading floors hard and trade through multiple trading channels, for about 5 to 10 years, then retired.

However, for the general public on the MAIN Street, their reply will generally be that they will SAVED, as much as they can from their already very small fixed monthly income for many years like say 40 to 45 years. That is because most of these people have been brainwashed at a very young age that they should always look to saving as the most secure and reliable form of investment for the future.

Most of the so called investing books, brokerage and including the mass media, all preach a basically FLAWED view of the stock market. And it is exactly because of this so called "traditional" view of the stock market as a whole that binds both dangers & opportunities together. However, it is usually the dangers that "kills" off most of the returning profit for the general public whereas it is the big brokerage / investment banks that make their millions. (Getting rich through the general ignorance of the MAIN Street general public.)

FIRST TRUTH ABOUT STOCK INVESTING

Never get tied down by the so called “Long Term Investing”.

One just have to take a long hard look at the balance sheets of some of these big investment houses or banks and you will see that none of them ever sit on long-term positions. They simply DO NOT buy and hold stocks – no matter how good a company they are.

Then how come most of the retirement plans want or teach you to do so ? Why ?

Say a young man whom just started out working on his very first job and wishes to smartly plan for his retirement about 40 years later. Why should he then simply follow the advise of the retirement plan or adviser and hold stocks over the long term. He has nearly 40 years of time to double or triple his initial investment with all different types of investments ranging from insurances, currency market and bonds.

What everyone forget about about wealth building is the true effect of draw-downs and declines on your stock portfolio.

And it also devastates your returns.

For example, if you have $10,000 worth of stock and lose 50% - how big of a gain do you need to get your $10,000 back ? Right, 100% gain. You need to make a 100% gain to recover from a 50% loss.

Think about it : a 50% loss on $10,000 is $5,000 but if a 50% GAIN on $5,000 is only $2,500. In order to regain your original $10,000 you need a 100% gain on $5,000.

The more you lose, the harder it is to get back to even…

* If you lose 25% in a downturn – you need to GAIN 33% just to breakeven

* If you lose 33% in a downturn – you need to GAIN 50% just to breakeven

* If you lose 50% in a downturn – you need to GAIN 100% just to breakeven

Just look at the numbers, the more you lose, the harder it keeps getting to recover…

* If you lose 75% in a downturn – you need to GAIN 300% just to get your money back

* If you lose 80% in a downturn – you need to GAIN 400% just to get your money back

* If you lose 90% in a downturn – you need to GAIN 900% just to get your money back

* If you lose 95% in a downturn – you needto GAIN a WHOPPING 1900% just to breakeven!

The harsh reality is you cannot expect to make money just by being “in the market”… “buy and hold” strategies are among the riskiest in the world…

That is because at best most trading strategies only work sometimes and rarely recover from big market downturns.


Second Truth About Stock Investing

The Main Force Driving EVERY major market move is…

Here is the true lesson about how the real markets work.

* If you believe stocks go up because the underlying companies do better – you’re dead wrong.

* If you believe the underlying fundamental economic conditions drive stocks up or down – you’re delusional.

* If you believe the market cycles drive prices up and down – you’re out of touch with reality.

The ONLY REAL REASON why stocks go up and down has NOTHING to do with what you’ve been told in business school, investing brochures or any of that other nonsenses…

* Stocks DO NOT go up or down because of how good a company performs.

* Stocks DO NOT go up or down because of how strong or weak the economy is.

* Stocks DO NOT go up or down because of market fundamentals, stock fundamentals or because of market cycles.

All of the above stated points are only SECONDARY to the One Primary Market Driver – SENTIMENT. The emotional state of the market is everything.

Third Truth About Stock Investing

The Stock Market is "Engineered" for the Middle Men to Profit

This is the fundamental truth.

Those trader or investor whom everyday come to the trading floor or his trading computer, believing that he/she is going to make a killing by getting “better” at picking stocks or commodities are the same exact one's who will always end up in a single-bedroom apartments, eating take away dinners.

The ones who get rich do not really care about becoming a "genius stock picker". That is because deep down they know it does not matter at all. It is their better understanding of how businesses works and function / operates that assist them in this case. Wall street is not built around the idea of picking the latest, greatest stock nor is it built around the idea that traders and investors are going to make home runs trades / investment.

These are simply ideas individual key big investors on Main Street project onto Wall Street. This untrue is also fuel mainly by the Main Street investors whom are always in LOVE with the idea that he / she is the only one “genius stock picker", that lone-wolf trader / investor, no one can stop.


One must always understand that Wall Street by itself does not make anything. So do the banking and investment bank themselves also do not make anything. They do not built new businesses, they do not build new houses, they do not create anything.

So why is it that Wall Street which produces NOTHING creates the most multi-millionaires ?

Simple, because Wall Street is home of the financial middle-men. They insinuate themselves in between everyone who does actual business – and take a cut of everything.

They’re financial tapeworms surviving by siphoning off money from the working economy.

* The Stock Market is designed for Middle Men to make money from the companies who go public.

* The Stock Market is designed for Middle Men to make money from the differences in prices in global markets.

* The Stock Market is designed for Middle Men to make money from the fees and commissions on client’s money who’ve been sold the idea of high-powered investing.

* The Stock Market is designed for Middle Men to make money from YOUR portfolio through the brokerage industry fees and commissions.

The entire system is set up, regulated and gamed based on how the MIDDLE MAN makes his money !

Need proof ? Just listen or watch the news :

Wall Street gets Big Massive Bonuses no matter what the economy and market is “doing”

They structured it in such a way to lead the general public into believing that their traders are just so good. Unfortunately, the true is that they are positioned to take full advantage of the money moving through the system.

So say when the government pumps money into the “market” it has to go through the investment banks and because they are in the MIDDLE, they take the biggest cut of them all. By the time Main Street investors get their return, it will always be a mediocre returns. There’s just no way around that.

So now that you know, what are you going to do about it ?

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