What’s this world coming to? This is from the latest Business Week:
Most people actually won’t get rich by buying individual stocks, Cramer says. Unless you do your homework, namely spending an hour a week researching for each stock you own, "You won’t beat the market, and you’ll probably lose money," he writes.
For Cramerites willing to do the research, the book helps construct a long-term, diversified portfolio. For most people, however, he advises low-fee stock index funds.
Yuck! I nearly spit out my eggnog when I read that. I couldn’t believe that Jim Cramer, Mr. Mad Money himself, would rather settle for mediocre returns than try to beat the stuffing out of the market. YUCK!!!
I have a great deal of respect for Cramer, but I’m very disappointed to hear him advocate index funds. This is horrible advice for investors. If there’s one single piece of advice you ever take from me, please let it be this—don’t
I prefer the advice Winston Churchill gave to the boys at Harrow in 1941: "Never give in, never give in, never, never, never, never—in nothing, great or small, large or petty—never give in except to convictions of honor and good sense."
Exactly. Personally, I think there’s something deeply un-American about index funds. It’s not even trying. Isn’t America all about opportunity? If you get up early and work hard, you can succeed. Index funds say, don’t even bother—you’re not going to win anyway.
Well, I have some news for Jim Cramer and anyone else who recommends index funds. The market can be beaten. I know because I’ve done it.
Not once or twice, but consistently for over 20 years. Since 1985, my Emerging Growth service has returned nearly 56-fold. That not only beats every competitor of mine, but it also beats the market by a mile. In fact, it circles it a few times.
Still not convinced, Jim? That’s how a lot of people once felt. They said the only reason I did so well with Emerging Growth was because I bought so many small-cap stocks. Once again, I had to prove the skeptics wrong. So 10 years ago, I started another newsletter, Blue Chip Growth, and that has also creamed the market, but this time we only used large-cap stocks. In Blue Chip, we’ve nearly tripled the market, and we’re about to beat the S&P 500 for the eighth time in the past 10 years. It’s no wonder that The New York Times called me "an icon among growth stock investors."
Let me add that this is a great time to add Blue Chip or Emerging Growth to your favorite investors’ holiday shopping list. You can get one year of Blue Chip Growth for just $149. You can also get one year of Emerging Growth for $995, or a three-month trial for $295.
The irony about all this index fund talk is that I started my career in index funds. I actually helped build some of the very first ones ever used. Back then, we couldn’t literally buy every stock in an index so we had to use computer modeling to mimic the actions of an index. That was my job. I had to design a fund of, say, 300 stocks to behave exactly like an index of 500 stocks.
I had one little problem—I kept beating the market. My models consistently had us coming out ahead of the stock market. Well, my bosses were none too pleased. I’m probably the only person who did poorly at their job because he was beating the indexes. After a few months, I submitted my resignation, and I’ve been helping investors beat the market ever since.
After nearly 30 years of being a professional investor, I’ve learned that the hard part isn’t getting into a good stock at the right time. No, the really hard part is getting into a good stock at the right time AND letting it go at the right time. Now that’s hard!
A lot of people can get one side of the equation right, but very few get both ends right. Fortunately, my team and I have been able to get both ends right year after year for a few decades now.
Let me give you a few recent examples of how I was able to spot bargains before the crowd and to issue sell signals before things got rough. In the September issue of Emerging Growth, I recommended selling NutriSystem (NTRI), the diet food company. You may be familiar with their commercials featuring Dan Marino. I first recommended NTRI in August 2005 when it was just $20.12 a share. When we sold it, the stock was at $54.23, so we made a 170% profit. Not bad for two years’ work.
I have to tell you that I got inundated with e-mails and phone calls from subscribers BEGGING me not to sell NTRI. I understand how they felt. No one wants to kill the golden goose. But I knew that these subscribers were investing with their emotions, not with sound judgment. My first rule of investing is to banish all emotions! Trust me, if things never worked out at Starfleet, Mr. Spock would have been a killer hedge fund manager.
Shortly after my sell signal, things got rough for NutriSystem. In early October, the company announced an "earnings warning." Ugh, that’s never a good sign. That day, the stock plunged by a third. The stock continued to fall, and by November the shares got down to $22, effectively erasing two years’ worth of gains. As a new buy to replace NutriSystem, I recommended shares of Graham (GHM), and the stock is up nearly 50% for us since then.
Yes, Virginia, the market can be beaten. It simply takes focus, discipline, a lack of emotion (OK, not Cramer’s strong suit) and lots of hard work.
This has been a great year for us, at Blue Chip and Emerging Growth and I’m expecting even more profits in 2008. I would like to wish you a happy and safe holiday season.
Sign up for three months of Emerging Growth at $295. You can get an even better deal by signing up for one full year at $995. Either way we’ll provide you with a money-back guarantee if you’re not happy within the first 90 days of service. Join us today!
