I interviewed dozens of self-proclaimed successful investors to discover how they made money in the markets. I came to a startling conclusion.
- remembered only their best trades
- justified their losses as someone else’s fault
- in total, underperformed the market
I kept searching.
Then I found a private trader who consistently beat the market handsomely (she shared her financial statements). With donuts and coffee in hand, I rang her doorbell at 7 a.m. She greeted me at the door and picked up the morning’s Investor’s Business Daily newspaper. We sat together at her breakfast table as she went through the newspaper circling stocks she wanted to watch that day. My coffee got cold as I furiously took notes, trying to capture everything she said about her investing approach.
When the market opened, we moved to her “investing cave” (den, really). With two computer monitors full of charts and data, she began trading.
By noon, I was exhausted. My host said, “Not a great day, but a good one.” Her profit from just a few hours of work meant a return of over 30% annualized. This was during a falling market.I was hooked. What she did not only had worked consistently in up and down markets, but it made sense to me.
She looked for:
- profitable, growing companies (good financial picture)
- then analyzed the stock charts for signs of heavy mutual fund buying
At lunch, she handed me the book and said simply, “Read it. It’s all in there.” That afternoon I began my new career.
The book was William O’Neil’s, How to Make Money in Stocks. After reading it, everything I knew about investing in the market changed.
- I saw my prior style of investing ensured a modest return only slightly above the market ups and downs at best.
- Even the expensive asset allocation software gave only modest improvements in returns.
- Now I understood that the little guys (individual investors) have one huge advantage over the big fund managers but I was not utilizing that one key to success.
- And that key was easily available if I knew how to use it. Then I realized any investor could use the key with some training.
I gathered three friends around a table at Starbucks and we began studying O’Neil’s book in a weekly class. This investing style made so much sense, they told their friends who told their friends. And after a month, we were too many to fit in Starbucks. I moved to a bigger venue and I launched my new training business, The Armchair Investor.It’s been over a dozen years since then. I now speak to a variety of investors groups over 15 times each month through weekly classes, workshops, investing groups, and clubs of all types.