Market MythsGuy Conger
There are three common Market Myths many would-be investors bring up to explain their inability to invest.
Market Myth #1: Buy and Hold doesn’t work.
Market trackers love to say “buy and hold” doesn’t work in volatile markets.
Traditionally, you would hear this from brokerage firms that needed their clients to trade in and out of positions in order to make their nut in commissions. But even in today’s world of low-cost brokerage accounts, there are still plenty of experts telling investors that long-term investing is a stupid move.
Now, I agree that a buy-and-hold approach isn’t ideal for some investors However, the idea that you can’t make very good money by sticking with big companies and holding them for years on end is patently false.
For example, take a look at Merck a firm that is often cited as “dead money” by so called experts.
I recommended this giant drug company for my own clients back in January of 2011.
Through yesterday, the shares have handed us an open total return of 46.7% … or roughly 17% A YEAR.
If only all our money could be that dead!
Or how about Pfizer, another big, boring drug company that I recommended for my clients exactly three years ago.
Including all our dividend payments, Pfizer has handed us a real-world return of 91.1% so far … or about 30% annually for three years straight.
I could cite plenty of other examples, but my point is that you can make LOTS of money by simply buying solid stocks at fair prices and then doing nothing more for years at a time.
Of course, a lot of folks will say that’s impossible now that the market has run up so much …
Market Myth #2: Buying stocks right now is a sucker’s move.
The chorus of stock market naysayers grows with every new all-time high in the S&P 500. And to be sure, we are no longer seeing a huge smorgasbord of undervalued companies out there.
At the same time, you CAN still find good bargains. In fact, I just alerted my clients to a brand-new opportunity in an oil and gas driller … one that I will be adding to my own portfolio tomorrow.
What you have to remember is that generalizations like “stocks are now overvalued” don’t tell the full story. There are many thousands of individual companies trading out there — each of which needs to be evaluated on a case-by-case basis.
Just because the market is sitting at some particular P/E ratio doesn’t mean there isn’t a small tech firm experiencing tremendous growth or a large retailer being unfairly punished because of its latest earnings report.
My point is that there are many valid approaches to the stock market — from buying and holding to aggressively trading a handful of companies you know very well.
The key is determining your goals right up front and then sticking with the plan you’ve made.
Which brings me to one last major market myth …
Market Myth #3: You can’t make money if stocks aren’t moving up.
Nothing could be further from the truth.
As I’ve already explained a million times, you can easily collect solid dividend checks month in and month out no matter what the underlying stock is doing (or not doing).
In addition, the market is always moving at least a little bit every day.
Plus, there are two more ways to make money from stocks during sideways — or even down — markets:
For starters, you can sell options to generate additional income from stocks you already own or even on stocks you’d LIKE to own.
This is exactly what I’ve been helping my clients do for years.
The end result so far? I’m tracking 26 straight profits and not one booked loss.
That’s right. Just by using options very conservatively, I figure my clients have already had the chance to collect as much as $3,630 in additional income out of the stock market in less than six months!
Meanwhile, you can also aim to profit as individual stocks — or the broad market — falls. And you can do this by buying put options … short selling … or simply using inverse ETFs.
So the bottom line is that there are countless ways to make money from the stock market, especially if you choose to employ a combination of the ideas I touched on in today’s article.