Saturday, May 4, 2013
I've got bad news. It's something that I've talked about before: Most of you will never get rich with stocks.
I'm fairly certain that, for most of you, investing in stocks will end up costing you money. If your experience is typical, you'll try investing in stocks two or three times in your lifetime. Each attempt will end in disaster. And then you'll swear off stocks forever...
How do we know this? The market research firm Dalbar has conducted mutual-fund studies for decades. The results consistently show that actual investor returns are far worse than the fund's advertised averages. Actual returns for stock-focused mutual funds have been around 3% annually – worse than returns from bonds and barely above the inflation rate.
A separate big study from Blackrock shows essentially the same numbers.
You've got to remember that if the average return is 3% (or less), a lot of people, probably close to half, are actually losing money in stocks. And the folks who are most likely to suffer losses are the folks, like newsletter readers, who do the most trading.
Most newsletter publishers wouldn't dare draw your attention to these facts. But I feel a moral obligation to tell you... again and again. I believe my job is to tell you what I'd want to know if our roles were reversed. I'm also telling you because if you can identify why most people lose money in stocks, then you've got a much better chance of succeeding. I'd say it's almost a lock. So why do most people lose money in stocks?
The biggest reason individual investors lose money in the stock market is because the game is rigged against you. The financial industry does not exist to enrich its clients. The clients provide all of the wealth required to maintain the financial industry.
If you're doing business with a big brokerage firm, you've got to realize that its real clients are the companies who hire the firm to sell you their stocks and bonds. You're the patsy at that table.
Likewise, financial firms make their profits by garnering the most amounts of assets to manage... even though everyone knows there's a negative correlation between an investment fund's size and its performance. The mainstream financial industry isn't your friend. They can't be trusted. They're leeches.
The second-most important factor is simply ignorance. Most investors have no idea how to value a security. Nor can they read financial statements. As a result, they always end up buying way too late and paying far too much. Or even worse, they buy stocks that have zero chance of long-term success.
It's not hard to learn. It's really not. It will take you about 20 minutes to figure out the basics – if someone would simply sit down and show you. Longtime readers know I don't believe in teaching – only learning. If you'd like to learn, you can now sit down with me... and I'll show you how I analyze stocks.
My team at Stansberry Radio recently recorded a screen-capture video, where I analyze two stocks I covered in my newsletter. One I recommended selling short in 2004, betting it would fail. It is now on the verge of collapse. The other I recommended buying in 2007. It has now doubled in price. In the video, I go through the numbers and show in simple terms how I knew one was a great business and the other would fail.
Anyone can use this video to become a vastly better investor. I urge everyone to watch this video.
You can watch it as many times as you want until you've got all of the concepts. To get access to the video, all you have to do is try Stansberry Radio Premium. It costs $10 per month – or as we say, about the same as a ham sandwich and a bag of chips. Give up your lunch one day each month, and listen to me on Stansberry Radio. You'll be healthier and wealthier.
Date Range:4/25/2013 to 5/2/2013
Date Range:4/25/2013 to 5/2/2013