Why it’s so hard to “Beat the Street” and how the pros do it

Now more than ever investors are surrendering to a passive strategy of indexing. This simple, one-step solution offers simplicity and the opportunity to outperform more expensive actively managed funds. However, a small group of managers “Beat the Street” meaning they deliver returns above that of the total market. How do they do it?

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The Passive Approach

By relegating your savings to an S&P 500 ETF or mutual fund, you’re capturing the low costs, consistency, and diversification that are the foundation of a sound investment strategy. Most investors are starting to embrace this approach. In a 12-month period through the end of November investors collectively pulled $358.8 billion from actively managed funds based in the U.S. while simultaneously putting $479.8 billion into passive funds. What’s causing this mass migration?

Many people have given up on the challenge of outperforming the market. Active strategies can be costly with their high fees and trading costs. The business and political landscape often change too rapidly for these funds to capitalize on inefficiencies. Over the long-term, an active strategy rarely works. Even fewer work consistently. However, there are three common characteristics to those who succeed.

Information

Those who outperform the market understand the value of information. The problem for many ordinary investors is that information is often disorganized and complex in its raw state. While there is plenty of data available via the Internet the most valuable metrics often require enormous time to access and analyze. Sophisticated data systems are out of reach for many of us; the tools and reporting are too complex.

At KINFO we put more information in your hands. More importantly, we also deliver the tools necessary to understand the numbers with a smooth graphical interface and intuitive design. Rather than combing through complex filings or disorganized charts the bottom line is always accessible. Spend more time earning and less time digging.

Costs

There are difficult headwinds investors of all levels face. Inflation, taxes, and market downturns all erode wealth. Costs are just one more pain point on this list. The pros are always vigilant with fees. This cost-conscious mode means considering the expense of a trade before hitting the button. Too many buy and sell transactions generate expensive fees that counteract market gains.

Similarly, the pros often play the value of a loss. That is, they understand how to offset capital gains taxes with losses rather than holding onto a failing stock forever.

Planning

The game of investing is chess, not checkers. The pros are thinking several moves ahead and choosing securities that are appropriate within the wider context of a diverse group. This concept is the basic idea behind Modern Portfolio Theory. Most importantly, the pros have a plan, and they stick to it. Many of the best even write the plan down, so they have a tangible reminder of what they set out to accomplish. With a plan firmly rooted, we are less likely to deviate and let the whims of the market dictate our actions.

As you become familiar with the KINFO site, you’ll soon discover that you can watch the pros through a window, not a keyhole.

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