How Bloggers Beat Wall Street
Wednesday was a great day. The so-called “amateurs” beat Wall Street’s finest by correctly predicting Apple’s (AAPL) reported earnings for their most recent quarter. And people are starting to take notice.
In a CNN Money list of the best (and worst) Apple earnings predictions, the bottom 20 spots (out of 41) were firmly occupied by the “professionals”. In fact, barring two bloggers, the bottom 30 were all analysts. The top 9 were individual investors.
Naturally, many people will be surprised by this and rightly so. It’s common sense to think that handsomely paid professionals who spend countless hours evaluating companies and who have the best investing tools in the world available to them would easily beat a few guys with a laptop and an internet connection.
But, the world is changing. Actually, to put it more accurately, the internet is changing the world. All you need is little more than a laptop, an internet connection, and a thirst for knowledge to outperform some of the best and brightest.
The fact that they were able to do this shouldn’t actually be all that surprising. Today’s individual investors have an unprecedented abundance of information, research, and tools at their disposal.
It was only 15 years ago that a self-directed individual investor had to pile through thousands of pages just to find potential investments. Now all it takes is a few clicks.
Combine this with the number of educational resources available and individual investors have a potentially lethal formula.
But is that enough for individuals to start leaving brokers and mutual funds?
From the numbers, it looks like it is. More and more individual investors are leaving the matrimonial home of the investment manager / broker to make it on their own (Source).
This is great and it makes so much sense. Leaving your money with a “professional”, with the exception of a select handful, is no longer the best way to grow your money.
Keys to Making it on Your Own
- Have a Thirst for Knowledge
The importance of educating yourself about investing can’t be stressed enough. It might sound simple enough but pick up a book on investing.
As a starter, try F Wall Street by Joe Ponzio or the Intelligent Investor by Benjamin Graham.
These books should help provide a solid foundation for all of your future investments.
2. When Looking at a Potential Investment, Read the Opinions of Others.
There are many individual investors doing excellent research. Check out investing communities like Seeking Alpha or even Motley Fool, for other investors’ take on your investment ideas. Often, they’ve done their homework and can help you paint a more complete picture of what the future might hold for the company you’re investing in.
3. Use Great Tools.
Using technology to find investment ideas that fit your approach can make your life easier and your portfolio stronger.
This could be anything from Google Finance to, dare I say it, Morningstar, to an innovative young up-start like ourselves.
4. Invest in Companies You Understand.
To quote the great Warren Buffett, “Stick with businesses [you] believe [you] understand.” For Warren, this “means they must be relatively simple and stable in character. If a business is complex or subject to constant change, [you’re] not smart enough to predict its future.”
Apply that same approach and be honest with yourself. It’s better to admit that a company is outside of your circle of competence, than to lose money investing in a company you don’t understand. There are plenty of potential investments out there. Just move on to the next one.
As shown by these veracious bloggers, beating Wall Street is certainly within grasp for any individual investor. With a little elbow grease and patience, you can help guide your portfolio to success without high fees or commissions.
Last but not least, always remember, no one values your money as much as you do.