The Single-Stock Approach That Increases Profits & Decreases Risk
When it comes to investing in the stock market, a common misconception is that more is always better. Essentially quantity over quality. We’ve all heard the logic before. It goes something like this:
If you invest in a pool of stocks you’ll be safer than if you just invested in one. This way if one goes down you don’t lose your shirt because you have 20 or 30 others.
Your investing isn’t a Jackson Pollock painting. Just throwing paint on the wall to see what sticks may work in painting, however, it’s proven to be a complete disaster when it comes to investing.
Instead of taking the time to figure out which stocks are actually going to be profitable (yes, it’s possible to do this) mutual fund managers pick a bucket of stocks that follow their “objective”, sit back and see which stock does well.
Here at The Wealth Titans, we know the truth. And it’s our mission to keep you from making the same mistake as the ignorant masses. Mutual Funds appear to be these wonderful investments that promise great returns with no work on your part. Remove the rose-colored lenses, and you’ll see this is far from the truth.
The reality is a one stock approach is superior to the pooled investment mutual fund approach. Here are two reasons why.
1. You Can Rely on the Strengths of an Individual Stock
When you try to relay on the individual strengths of a stock, they get watered down when you try to examine a pool of stocks (such as a mutual fund)…
You need to know The Three Power Metrics before you ever invest a dime of your hard earned money.
- Earnings Per Share
- Price to Earnings Ratio
- Equity Growth
When you hand your hard earned money over to a fund manager, there are very few numbers you can actually examine. You can’t make sound investment decisions without the important financial facts. The facts are what make you money.
The Three Power Metrics are your short cut to the financial facts you need to insure you only invest in rock solid companies. These three numbers remove the guesswork of finding great stocks and add layers of safety to your investment.
By providing a clear picture of the financial strength of the company.
With an individual stock, the facts are as clear as day because the required numbers are readily available, and you can find them online in less than 30 seconds. It’s impossible to do this with a pool of investments like mutual funds. Instead, you’re forced to trust the fund manager to choose stocks and hope he doesn’t pick too many duds.
This leads us to the second reason our one stock approach is superior to a random pool of investments.
2. You Can Buy At the Right Time at the Right Price
You Can Buy when an individual stock reaches historical lows (buy at the right time)….
Here’s a simple investing truth: You make money when you buy. It’s a basic concept the masses seem to forget when investing in the stock market.
Buy low, sell high.
Simple logic right?
So how would that work with a pool of investments? How do you know you purchased the mutual fund at a good price? Did you really “buy low” to “sell high”?
The short answer; you don’t.
Mutual Funds are constantly changing their investments, managers, and shares outstanding so it’s next to impossible to use the Three Power Metrics to keep track of what your investment in the pool of stocks is actually worth. (If you’re cool with doing the math every day, by all means we won’t stop you).
Let’s expose the root of the problem with an example.
Example: Gentherm is a great buy at $16.90. If you have this stock in your mutual fund, great. But you probably won’t make much money on it. Why? Because your mutual fund is also invested in potentially dozens of other companies, half of which could be over-priced, killing the profit potential of Gentherm. In the end you’re stuck with the standard, mediocre returns of a hodge-podge mutual fund.
If you focus your investments like Gentherm when it’s priced at a bargain, you can end up getting in low and selling high, and walking away with gains far greater than you could ever hope to achieve in your mutual fund.
You know it’s not going to tank and become worthless because you have the Three Power Metrics on your side.These financial facts add an iron clad layer of safety mutual funds can’t provide.
You can choose to invest in profitable companies based upon financial facts so there’s no guess work or you can gamble on a random pool of stocks some stranger threw together.
You see, using the Three Power Metrics you can actually calculate exactly what a stock is worth. In seconds, you can know if a stock is a bargain or overpriced. If you use our free investing calculator, you can also know exactly how much money you’ll make using the Three Power Metrics.