For today’s essay, it would be wise to remember the old investing adage: “The trend is your friend.” As most investors already know, investing in trends is one of surest ways to success in the stock market. But while the phrase itself is simple enough to understand, we often find that most investors don’t know which trends to follow… or even worse, invest in the wrong ones. Specifically, we generally find that investors want to focus on economic trends… things like interest rates and global debt/GDP ratios. Some investors go so far as to follow the cover model for the… Read More
For today’s essay, it would be wise to remember the old investing adage: “The trend is your friend.” As most investors already know, investing in trends is one of surest ways to success in the stock market. But while the phrase itself is simple enough to understand, we often find that most investors don’t know which trends to follow… or even worse, invest in the wrong ones. Specifically, we generally find that investors want to focus on economic trends… things like interest rates and global debt/GDP ratios. Some investors go so far as to follow the cover model for the current year’s issue of the Sports Illustrated Swimsuit Edition, believing that when the model comes from the U.S., the S&P 500 is likely to outperform. Not to berate the homemade economists of the day, but these investors are most likely wasting their time. The truth is, economic trends can (and should) be mostly ignored by investors. Even economists — people who have dedicated their entire lives to following macroeconomics — can’t accurately predict when a major economic event has (or will) occur. It took the National Bureau of Economic Research (NBER) 15 months to announce that the recession ended in… Read More