How to beat the stock market

How to beat the stock market is a question that many people ask. There is a portion of people that are against beating the stock market and there is a portion of people that think that is better to try to beat the stock market.

This is not financial advice, this is only my opinion, do your own researcher.

In order to beat the stock market there is an strategy that has work for some investors.

Some people call it buy and hold until you died

You ought to buy good high quality companies, if you don’t want to over pay for the good high quality companies you can wait until the companies are on a downturn to buy their stocks when the price is low.

Does not matter how good a company is. The stock always goes up and down, so buy when the stock is down to avoid over paying.

You might ask what’s a good high quality company?

A good high quality company is a company that has a high return on capital, the company is in the market for the long run, the company has space to grow.

Example:

Pharmaceuticals, you can find average return any where between 10% to 20%. Yes high risk and high return can also mean high risk and high lose. But just bare with me.

We know that pharmaceutical is not going away, people will always need medicine. When people are sick and in pain they’ll do anything and pay anything in order to get better and healthy.

Keep in mind, that if a company on average gets 10% to 20% return on your money every year. Most likely it will keep getting 10% to 20% return on money.

How do I know this? two ways, one way you can look at the company past data.

Another way is you can compare a company to people with habits. Company are control by people, people has habits. If you have a habit of eating your nails, most likely you will keep eating your nails even if you want to change.

Therefore,

If years after years a company get low return on capital like 5%, most likely it will keep getting low return on capital.

If years after years a company get high return on capital like 15%, most likely it will keep getting high return on capital.

Now that we got that out of the way, lets’ talk about how to use OPM

You can use other people’s money to become financially wealthy

OPM stands for other people’s money. You can use other people’s money to become financially wealthy

Example

If you take a loan at 3% interest rate and you take that loan and invest it to get 5% rate of return. then you are profiting 2%.

If you take a loan at 3% interest rate and you take that loan and invest it to get 10% rate of return. Then you are profiting 7%.

If you take a loan at 3% interest rate and you take that loan and invest it to get 20% rate of return. then you are profiting 17%.

So, you simply are taking a loan, paying the loan back with the return on your money, and profiting the rest.

Now remember, the strategy is buy and hold until you died. So, Once you buy, you hold it for the long run, and just pay back the loan since you are making a profit.

How to pay the loan?

Of course, you obviously need to sell a portion of your investment to pay the interest of the loan.

Your money will grow to a critical point

Eventually, your investment will get to a critical point where you have so much money that you can live off a portion of your investment.

That’s my friend it’s call financial Independence.

When your journey on this planet end, your wealth is pass to your next generation tax free.

That’s call generational wealth.

That’s it.

Take a calculated risk.

Now, start and adjust as you go.