There’s more than one way to beat the market. Some people like to buy rising stocks in growing companies, counting on the momentum to push the value of their investment higher. The problem is, that’s risky, as when such stocks peak, whether it be following bad news or from simple investor exhaustion, they often fall faster than they ever rose.
Some people like to look for small cap stocks that have the potential to grow into giants, then invest in several such, and wait. The problem is, that’s risky, as the percentage of small cap stocks that make it is so small that there’s a decent chance all the stocks in such a portfolio will go to zero.
Some people like to buy stocks that have forward dividend yields in excess of average market returns, figuring they will get the dividend yield no matter what, and then, if their stocks rise, the capital gains will just be icing on the cake. The problem is, this is risky, since the higher a dividend yield rises, the more problems the market has seen with the relative risk/reward ratio of the stock at its current cost.
There’s a theme here, which is that to have any chance of beating average market returns, you have to be willing to take on greater than average market risk. Furthermore, it makes no difference how you choose to do so. No strategy can save you from the fact that you face greater than average market risk if you are investing for greater than average market returns.
But if you’re OK with that, I sure the **** am. Let’s do this.