Most investors are doomed to lose money in stocks. Use this, and you won't be one of them.
From Michael Ford at Stansberry & Associates:
According to The New York Times, investors are losing money on some of the best-performing stocks and investment funds on the market.
How is this possible?
It’s a paradox that some researchers call “The Behavior Gap.”
“Pretend for a minute that we have a mutual fund with a 10-year-average return of 10 percent per year. That’s the investment return. If you put your money in the fund, kept it there for the entire 10 years, and didn’t add or take out any money, then your investor return would also be 10 percent.
“The problem is that few people invest this way.”
Instead, most people buy and sell at the absolute worst time. We hold on to losers much longer than we should… and sell off our winners too early.
The end result is… even if a popular investment rises 10%, 20%, or more – most investors only see a fraction of the total return.
A recent Bloomberg study of 88,000 investors confirms this fact: “People are one-and-a-half times more likely to sell a winning stock than a losing stock.”
And a similar study at the University of California found that two most common mistakes investors make is they “disproportionately hold onto their losing investments and sell their winners too early.”
We recently spoke with our friend, Dr. Richard Smith, a U.C. Berkeley graduate who’s been studying this phenomenon for the past decade.
He told us:
“The average investor has no clue whatsoever when to sell an investment after they’ve made it.
“It’s hard for individual investors to re-wire their brain… They get excited when they see a stock roaring higher – and they want to own it. And if that same stock falls the following week, they’ll often panic and sell.”
It has nothing to do with how smart you are… or what kind of work you do for a living.
Dr. Smith – a trained mathematician – made this same mistake over and over again himself. And it almost cost him his marriage.
That’s what inspired him to begin work on his latest project… a tool he calls a “Magic Calculator.” It’s designed to help investors fight their own destructive tendencies… to overcome the “behavioral gap” and set themselves up to make thousands of dollars more from the same investments they already own.
I asked Dr. Smith what he meant by “magic” and he told me:
“There’s no hocus pocus going on here. We just call it that because it’s so easy to use. It synchs with your portfolio and tells you exactly when to sell. That’s the magic part. You don’t have to worry about that ever again.”
One of his first clients was a former mutual fund VP named Steve. It would have successfully improved his portfolio return from 144% to 200%.
Another fellow he shared this with was an “investment guru” whose portfolio had earned 166% over the last decade. If he had used the “Magic Calculator,” the guru would have cleared 253% over the same period.
Dr. Smith also shared his formula with hundreds of investors who had lost money in the stock market…
Like Craig T., a 60-year-old retired psychologist who lives in Florida. Craig lost 26% on his portfolio between 2010 and 2012, but he would have GAINED 56% over the same period using the “Magic Calculator.”
Dr. Smith has published a full report on this formula, which we’ve posted online free of charge. He’s also created a special offer for Crux readers to try out his “Magic Calculator,” totally risk-free.
For the full details, click here.
More investment wisdom: