Billionaire hedge fund managers were certain the bull market would end in 2014, but it didn’t. Each time stocks moved lower, the bulls came roaring back.
Those who tried timing these moves were typically crushed. That’s why so many pundits advised the little investors to ignore the chatter and stick to owning index funds.
I can’t imagine more horrible advice.
Sure, as things currently stand, you’re looking at a gain of near 10% for the major market indexes, but if you simply deferred to owning an index fund this year, you left so much more on the table.
In 2014, simply owning the right stocks proved to be a potent strategy.
By the right stocks, I’m talking about companies with low valuations and strong profit growth expectations. Each month I run a model of the entire market, ranking each stock high to low, using only value and growth as my criteria.
If you used this approach on a basket of 20 of the highest-rated stocks at the end of 2013 and held it until today, with no trading (the supposed advantage of index investing), it would have yielded a 17% gain—crushing the returns generated by the indexes.
Add the trading features of our rules-based Millionaire Blueprint system and the same stock selection strategy, and you’re staring at a gain of almost 30% this year.
It’s not hard to determine why this approach is so powerful.
Simply put, you’re buying stocks that are or will soon be desired by other investors. The objective of equity investing is to buy profits. What better way to do that than to buy stocks that are growing profits rapidly, yet trade for a cheap price?
No matter what the market throws at you, I’ve found this to be an effective and powerful way to invest in the market—far better than owning an index fund.
As I survey the landscape today, there are plenty of stocks to buy, even with the markets trading near historical highs.
One in particular stands out in a big way. It’s a stock that at minimum will exceed the expected single-digit returns of the major market indexes.
On the top side, this stock could double in value in 2015.