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v. March 20, 2017
» Stock exchange profits / optimization EN DE FR
Stock exchange profits / optimization, best hedge fund profits, money invest, shares, commodities, gold, bonds, fundamental, pschological and statistical analysis, charts, science of predictions, tax saving aspects... international, US, UK Great Britain, Germany, China, Japan, Russia, Arabic countries, Asia, America, Europe... everywhere: The eternal golden rules for stock exchange profits and success and their scientific roots.
This text is written in the ''Denglish'' language (''D''eutsch + ''english) ; English, when written by Germans. You will appreciate. :-)
Simplified terminology: ''shares''.
This text mainly uses the word ''shares'', to keep the text of the rules clear and simple. Most rules apply in the same manner to all kind of investment offers, financial products, financial constructs.
The text applies ''investment market dominators'' as a global expression for those who dominate the marker like banks, insurance companies, pension funds, including there customer relationship services like brokers and consultants.
The basic stock exchange success rules fit on 1 page
Practically all major lossed of individual investors are due to the lack of observing at least one of these rules.
Everybody has already read these rules. Nothing is new here. The only need is always to apply these rules and there rational priority over emotional aspects.
The investment market dominators are mostly authorizsed (by legislation) to exercise at the same time activities of opposed interest:
They can act for the same investment for their own interest and at the same time for the interest of their customers (individual investors).
Example: A bank can sell the owned shares of a business company to a customer. Possibly the bank will reduce its ownership of such shares for the reason of considering them as a second class investment. So they are perhaps priced above their permanent value. Possibly the bank has instead the role of selling a significant volume of shares for some other reason. So these shares are perhaps priced far below their permanent value.
The bank staff will perhaps not be informed about such aspects. Anyway, the average customer would not understand the basic difference. The shares will be recommended as first class investment because every invest recommendation is implicitly declared as ''first class''.
A constellation of representing opposed interest is for valid reasons strictly prohibited for lawyers and for some other professions. This might be helpful for all investment recommendations, too. But only a small number of violation types is prohibited by law (like making undecent profits based on insider knowledge). - Politics are not subject of this text. So let us appect the current constellation as a matter of fact without any further discussion about it.
Much trouble with the stock exchange has here its origin. The 'consultants' who serve individual private savings investors are mostly not neutral consultants. They are mostly also actors in a visible or unvisible manner for the interest of investment market dominators.
The trouble with this is: The investment market dominators need in an overall-statistics in the long run the losses of individual investors - ''in order to maximize their own profits'' -???. They need these earniings to pay salaries, to subsidize the cost of free bank accounts, to maintain their service structure.
So the matter is better balanced as it sounded at the first glance.
Now to the rule :
The rule for your individual money invest needs has become evident: :
You NEED a consultant - because media information is not fully reliable, is close to 100% an evident or indirect result of marketing efforts.
You have to be well informed so that your personal consultant just has to add his superior knowledge of the current market situation.
A trusting customer is good for bad consulting. A critical customer is good for good consulting. If an invest consultant is in contact with a well informed customer, consulting will mostly conform to the rules following here below.
The basic law of the stock exchange is:
- when it went up, it will go down;
- when it went down, it will go up.
Refinement A of the rule: Probability:
- The more it went up, the higher the probability that it will go down;
- and the inverse.
Refinement B of the rule:
- As long as most believe in 'up', it will continue going upwards.
- As long as most believe in 'down', it will cotinue going down.
Conclusion : You have to analyze the current point on the curb.
The statistical facts are clear. So the difficult task is mainly psychology: To know when the maximum or the mininum is reached in the herd behavior of the masses.
The rule for your individual money investment needs has become evident:
You should buy shares as long as it is prevailing opinion that this is an indicator of you madness.
You might continue buying shares as long as it is sure that ratings will increase.
You have to sell shares as soon as ratings approach the maximum. Perhaps shift to bonds.
You should not wait to take part in the maximum - to difficult to control for an individual investor.
Then you will observe how other people are losing there money.
The average cycle duration is 7 years. This is a lot of an average life span. Clever investors will stay away from the stock exchange durch 60...80% of time. A lot of self discipline is required. Your money has to leave the stock exchange just when the media hype in favor of stock exchange invest is approaching its maximum.
The average cycle duration is 7 years. This is a lot of human life span. Clever investors will stay away from the stock exchange durch 60...80% of time. A lot of self discipline is required. Your money has to leave the stock exchange just when the media hype in favor of stock exchange invest is approaching its maximum.
The distributed participation of citizens in the capital stock of economy could theoretically be organized with a more direct relationship to the true ''capital'' of companies, whatever this might mean. Then share prices might grow following the inflation and economy growth rate.
So it is a historical and arbitrary evolution that the stock exchange concept with its gambling effects is governing a major segment of the world of economics.
It fitted to its origin, when British and Dutch colonial investment was done under the risk of total loss or huge profits, when ships could sink including a lot of precious goods due to a storm, or finally arrive and earn much money, and so on. This world of lack of reliable information and full of unpredictable risks was a world of game and required something like the stock exchange.
In our time information spreads within a second over the world, and risks can be covered by outsourcing them to insurance companies. So the stock exchange has lost its basic structural economic need. It is maintained because it generates a lot of business and excitement, and because it is an established tool for distributed ownership - one possible way for the economic need of retirement savings.
A basic need for gambling type investment mainly remains for the special case of innovative companies with uncertain success. But just these companies are mostly excluded from direct access to the financial markets. The access barriers are so high that acces is dominated by specialized (frequently speculative) service providers. They usually organize a prior deformation of innovative businesses to the expectancies of the market, e.g. a staff of at least 50 to 100 persons, prestigious premises, impressing printed information, long-term planning while the future is in reality unkown, expensive media marketing. These expectancies mostly create unhealthy business structures, hence mostly investor losses.
Very different forms of capital coordination back the major part of economy, for example in the case of small and medium size businesses, state-owned activities, public administration, individually owned real estate, saving accounts with loans to businesses, etc.etc.. Modern economy could easily function without a stock exchange.
But as long as stock exchanges dominate the markets and financial emotions, we will have economic cycles of approximately 7 years.
This is due to the required duration of restructuting the investment market dominators, based on profits or based on losses. Due to annual balancing, the whole process requires each time 2 or 3 years.
With a total cycle duration of 7 years, it also fits to the human life span and to memorisation habits. After 5 years, the last stock exchange disaster has become a matter of history for most. Those who lost much money, are lost forever for these markets. But meantime there is a new generation of people who believe in the dreams how to become very fast very rich. A minority among them will even fulfill their hopes.... For example those who will observe the basic rules which you are just reading.
A good approximation is that there are 7 years between 2 maximum points. This rule is not as helpful as it appears to be. It was said - not checked here - that it took the US stock exchanges 20 years, to return to the ratings of 1929, hence 3 such 7-year-cycles.
But it is normally a good rule to start to invest in shares
- approximately 3 years after the last maximum;
- and approximately 7 years after the last minimum;
- but with added analysis if action should take place a bit earlier or later.
Standard shares grow slower, but drop less than shares of smaller companies or shares of ''en vogue'' economy segments.
So if the tendency is 'up', buy ''en vogue'' shares, if the tendency is undecided, buy standard shares or begin to sell everything.
The transaction fees and the intervention time lag are for individual investors an important disadvantage in case of rapid decisions. So the individual investor should better set on trends, not so much on rapid changes.
Your bank consultant will possibly try to convince you to ask for a bank loan in order to buy more shares and to win more. This might duplicate your profits, the profits of the bank, possibly the personal commission of the consultant.
Ask the consultant if he would agree to manage the account for such a promising concept entirely in the name of an offshore company which you would be willing to create for this. - No personal liability... The company gets the loan and does the investment.
If the bank finances all the working capital for this - and all participants in this deal will share the profits - why not? - The consultant will then have to explain why his suggestions is wonderful if covered by your personal liability, but not wonderful enough to be covered within the liability of the bank.
If you are convinced from the fact of the 7-year-cycle, the situation would be different. On the lowest level of the cycle it might be helpful and useful to finance shares by loans. Hopeful that your bank is intelligent enough to do this in a period when the bank staff has just observed major customer bankruptcies due to such loans when agreed in the top period of the cycle.... In the best case and with such loans, one single stock exchange cycle of the usual 7 years might be sufficient to multiply your owned capital by 10. An initial capital of 100 000 might increase to 1 million.
Try to get financial publications with ''buy! sell!'' recommendations 1 day or several hours before the official distribution day / time. Observe the share ratings behaviour for the buying recommendations.
You will soon find out how many days or hours after a buying recommendation the corresponding shares are rising and after which delay they are dropping again. This way you have become somehow an insider without violating law.
Do not believe in any rational theory of rational predictions or rational value analysis. The stock exchange ratings are not defined by mathematics or values but are a result of cumulated opionons.
Find out the prevailing opinions - it is left to you, how.
Then anticipate their influence. Act correspondingly. - First act several times in simulation, in order to test your method without the risk of losses. As soon as your simulations always end up in being the winner, only then begin to do it with real money.
If mathematical or otherwise computerized tools are helpful to measure just these effects of heard behavior, they can be used.
Example : If for a specific market most actors believe in charts, you should try to anticipate their action based on the just prevailing theories about charts. The difference is evident: You do not (should not...) believe in charts as an advanced predictions tool. You are the meta-observator who observes those observing charts and believing in some kind of significance.
Once upon a time, hedging meant to limit loss risks by some clever strategy.
Now and with hedge funds, it is apparently used for everything which is somehow speculative - high profit opportunities, corresponding loss risks - hence basically NOT hedged???
The rule for investing your money has always to be : You have to study what is done with the money. Partners have to possess 100 % reliability. New companies have to be backed by a formal and valid guarantee from a recognized institutional investor (bank, insurance company or so). This is even more important for offshore companies if not possessing a true administrative office, if no staff, if no longer company history.
In addition, the concept has to be verified if it is valid. If somebody promises to earn far more than others for your money, the key question is: Why are others not doing the same? And why is he offering this for your money instead of lending money from the institutional investor backing his project?
When receiving valid answers for all this, there is no reason to stay away from something which earns more for your money. The key question is the real availability of offers fulfilling all the conditions listed here above.
You do not depend from the cycle rule for all kind of more complicated constructs like betting on the future ratings of something. Eternal Golden Rules like listed here concern the goal of the marority, hence how to make the maximum from saved money, and this without becoming a financial expert. If you want to compete with financial experts, you will first need to learn a lot. In addition, you have to exclude all those markets where your access and intervention tools are not enough efficient, compared with competitors, or where fees are for you far higher than for competitors. There may be market segments for which outsiders have at least a chance to decide better than financial experts. Think for example of commodities. This rule list does not deal with all this. It only supplies basic rules for savings investors and similar intentions.
And how are the Golden Rules for gold? Gold does not generate earnings. Before comparing the long term gold price evolution with that of a share index, you would have to know if the share index concerned includes accumulated annual earnings or not. Be aware that this may differ from one share index to the next. As a basic rule it has to be assumed that the gold price long term trend tends do be below the inflation trend. In this case, gold as a long term investment would only be helpful for those who want gold for specific reasons. As far as concerns the gold speculation, why choosing the difficult way in an overcrowded market, when it is so easy to become rich by the 7 year stock exchange cycle?
If the rules above appear to be poor in number and poor in hype, try to find other rules of similar reliability. Send them to nospam @ inv7.com
If the rules are on the same reliability and simplicity level like those above, they will probably be added.here.
The author (economist) will not recommend himself for functions as a financial consultant. The rules above are common sense. The problem is, while being comon sense, their violation is common habit,
And after the recommendations above, please be aware that there is no guarantee possible how to earn money with the stock exchange. It is like with lawyers:
- If WE have won, it is due to OUR efficient cooperation.
- If YOU have lost, it is due to YOUR own decisions.
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