5 Investing Strategies to Beat the Stock Market


I’m sharing five of the best investing strategies,
how to get started and what to look for. All of these strategies will help you beat
the market and one will give you a stress-free strategy to beat your goals. We’re talking investing strategies in stocks
today on Let’s Talk Money. Beat debt. Make money. Make your money work for you. Creating the financial future you deserve. Let’s talk money. Joseph Hogue with the Let’s Talk Money channel
here on YouTube. I want to send a special shout out to everyone
in the community, thank you for taking a little of your time to be here today. If you’re not part of the community yet,
just click that little red subscribe button. It’s free and you’ll never miss an episode. I love investing. I’ve been doing it since getting out of
the Marine Corps and have done it professionally for more than a decade as an equity analyst. So I’ve seen my fair share of investing
ideas, from the technical trading strategies of the quants to fundamental strategies followed
by investors like Warren Buffett and Peter Lynch. In this video, I’m going to detail the five
most popular investing strategies, how to get started and what to look for in stocks. I’ll highlight the risks and returns in
each strategy and give you everything you need to be successful. One of those strategies is going to be my
favorite, the goals-based strategy. It’s this strategy that is going to make
investing stress-free and will help you not just beat the market but beat your personal
goals. You see, most of these other strategies we’ll
talk about are part of that returns-based investing strategy that has you picking stocks
and chasing returns. What happens in these strategies is your focus
gets taken off the more important idea of your personal goals. We’re going to talk about those other investing
strategies because they can help you make money but be sure to stick around for that
goals-based strategy. Then, in a special free webinar I’m offering
to subscribers of the channel, I’m going into even more detail on that goals-based
strategy to give you everything you need to beat your goals. The webinar is completely free, I’ll leave
a link in the video description below to sign up. In it, I’ll guide you through every step
of my goals-based investing course, a 12-lesson course on customizing your investing strategy
to meet your needs. The webinar is free and will give you everything
you need to get started. I don’t believe in holding anything back
to sell people into my course. It’s just there for those that want a more
hands-on and detailed approach and I’ve added a coupon code in the video description
below so check that out. Our first investing strategy is a favorite
of Warren Buffett, value investing. With value investing, you’re going to be
looking at fundamentals of the business like its profitability and competitive advantage. You’ll use measures like the price-to-earnings
ratio to compare a stock with others to pick investments that are relatively cheaper than
others. The idea here is pretty intuitive, you’re
buying stocks of companies that are cheaper and waiting for the rest of the market to
catch-up with your outlook. You find stocks by comparing financials and
other measures so some things you might look at are the price-to-earnings ratio, the operating
margin which is the basic profitability of the company, as well as sales growth and earnings
growth. You can also look at the price versus other
measures like price-to-sales. There are two things you want to remember
when using the value investing strategy. First is that this is all relative to similar
companies and there’s actually two points in that. You have to compare companies with others
in the same industry. The price-to-earnings ratio of a bank is almost
always going to be lower than that of a tech stock so you can’t compare the two. Investors are just willing to pay more for
that tech stock growth than for banks. So you have to compare banks with banks and
tech stocks with tech stocks. Also though is that this is all a relative
valuation. That means value versus some other value,
not necessarily that something is a good investment. That might sound a little confusing so let’s
look at an example. If shares of Facebook are trading for 30-times
earnings, so a price-to-earnings of 30, while shares of Twitter go for 20-times earnings,
that means shares of Twitter are relatively less expensive. If we also see that the stock market is priced
at 25-times earnings, then we could say that Twitter is relatively less expensive there
as well. What it doesn’t tell us is if Twitter is
a good investment or not. Maybe all three of these investments; Facebook,
Twitter and the market are over-priced. Maybe all three are underpriced. Value investing tells you if something is
cheaper or more expensive than other stocks. Another point here is that price isn’t everything. Value investors tend to get caught up in that
price-to-earnings measure and overlook all the other ways to pick a good investment like
profitability, sales growth and everything else. Use price to find that relative value but
don’t forget some of the other measures. Our next investing strategy is called growth
investing and this one is more in the style of Peter Lynch, the Fidelity Investments manager
that nearly doubled the market return for more than two decades to 1990. Growth investing is focused on finding companies
that are growing sales and earnings at a much faster rate compared to others in the industry. Since stocks are an ownership of future earnings,
growth investors reason that those earnings are what really matters and they go after
the companies growing fastest. Of course, investors are going to pay more
for a stock where earnings are growing twice as fast as others so that price-to-earnings
ratio is usually much higher than what you’d pay for another stock in the same industry. Now growth investing isn’t just about that
sales or earnings growth. You have to look at why the company is growing,
what competitive advantages does it have and is it likely to carry over into the future? That leads to some important points in growth
investing. First is that you have to be careful about
paying too much. Just like value investors get caught up focusing
only on the cheapest stock, growth investors can get caught focusing only on that stock
that’s growing earnings the fastest. They jump into a stock trading at a price
100-times the annual earnings. Now that kind of price-to-earnings is extremely
hard to justify so the growth investor just turns a blind eye and focuses only on growth. There has got to be a balance between growth
and price, and actually we’ll see that in the next strategy. As a growth investor, you’ve also got to
have a thesis, a reason for why that company is going to keep growing. Let me explain that because it’s more important
than most investors realize. A growth stock is going to be more expensive
on that price-to-earnings measure than other stocks because investors believe that faster
sales or earnings growth is going to continue. The market has an expectation for how fast
the company is going to grow for two or even three years into the future. If the company continues to grow but maybe
at a slower rate than expected, investors are going to be disappointed and re-evaluate
the company as a growth stock. For these types of stocks, that investor sentiment
is hugely important. Just a little crack in the enthusiasm for
a company and that high price-to-earnings is going to come crashing down. Your job as a growth investor is to make your
own call, your own analysis that points to faster growth than expected or for longer
than expected. Also with the growth investing strategy, and
this is true of value investing as well, they are less buy-and-hold strategies than they
are strategies that require constant analysis. You might hold these stocks for a couple of
years but you’re constantly having to go back to analyze the growth potential or value
in the stocks and selling when that thesis breaks. This need for that constant analysis and stock-picking
is something we won’t see in the goals-based strategy that’s going to result in a lot
less stress in your investments. Because of the risk in growth investing, that
focus exclusively on growth, a lot of investors use what’s called the GARP strategy or growth
at a reasonable price. Here the focus is still on investing in companies
that are growing earnings faster than peers but we’re also looking at value. For example, an investor looking at media
companies may decide that Netflix is just too expensive even on annual earnings growth
of 232%. Instead they might go with shares of Disney
that is still growing earnings at a very respectable 24% rate but priced at just 16-times earnings
per share. I like the idea behind GARP investing, getting
both growth and value. The problem is there’s really no definition
or guidance in either. Investors trying to have their cake and eat
it too end up settling for something that’s not quite growth and not quite value. Just understand when you use either of these
three investing strategies, you need a clear understanding of the measures you’re going
to use and what you’re going to prioritize. Our fourth investing strategy before we get
to that goals-based strategy is dividend investing and this one is hugely popular. Now when I say dividend investing, I’m not
just talking about dividend stocks but any stocks that pay a high yield so including
master limited partnerships (MLPs), real estate investment trusts (REITs) and business development
corporations or BDCs. Investors love dividends and why not? Who doesn’t love getting money added to
their account every few months or even every month from some of these monthly payers? And dividends represent a source of guaranteed
return. While stock prices might jump around from
bull market to crash, destroying years of returns, that money you collect from dividends
is always a positive return. We see here a chart of total return by decade,
the proportion from dividends and from price return. Dividends have accounted for between 16% to
as much as 73% of the total return from investing in stocks. Just like the other strategies though, there
are some points to watch for with dividend investing. First is understand the tradeoff between paying
dividends and growth. A company can do two things with its earnings,
pay them out as dividends or reinvest for growth. Getting that dividend is nice but not if it
means the stock price goes nowhere because there’s no growth. Here you need to look at the payout ratio
which is just the annual dividend versus earnings. How much of earnings is the company paying
out and how much is it saving back? Is it enough and what is it compared to peers? You want to balance that high dividend yield
with the potential for a company to grow. Again, you have to look at this compared to
peers in the industry. Companies in utilities and telecom are going
to have a higher payout ratio because cash flow is more stable and reinvestment might
be limited. Companies in tech and other sectors will have
lower dividend payouts so remember to compare apples-to-apples here when trying do decide
if one company’s payout ratio is too high to leave room for growth. Something else to watch for in dividend investing
is that it’s not necessarily just about dividends when talking about that cash return. Share buybacks where the company uses cash
to take shares off the market is also a form of shareholder cash return and has become
a big part of the market recently. In fact, share buybacks have contributed an
additional 3% cash return to stocks in the S&P 500, that’s more than the 2% dividend
yield. So don’t neglect companies with maybe a
lower dividend yield but that might be providing that high cash return to investors through
a buyback. Now we’re on to that goals-based investing
strategy and this one is going to be different from all the rest. Here instead of picking stocks as our focus,
we’re shifting that focus to our goals and what we want out of investing. Goals-based investing begins, naturally, with
your goals. I see so many investors just wander aimlessly
picking stocks and reaching for any return they can get and they have no idea why they’re
investing. They may have a vague notion of reaching a
million dollar portfolio or investing for retirement but they don’t have a clear picture
of their goals. The problem here is when saving gets tough
or when market returns start to suck, the investor loses all motivation. They end up panic-selling out of stocks, they
lose thousands to fees and they take money out of their account. It happens to so many investors. Why would you keep sacrificing to invest if
your account is going nowhere and you have no clear goal to motivate you? Once you’ve defined your goals, I mean really
built a mental picture around what retirement looks like or that investing goal you have. Then you start to look at yourself as an investor,
how much stress you feel from stock prices and how much risk you can take in your portfolio. It’s this personalized approach that makes
goals-based investing so powerful. You’re not just chasing stocks. You’re building a portfolio specifically
around your needs. Since your goals and your investor-type are
not going to change frequently, the investments you choose won’t change either. You can invest in a group of funds to meet
your goals and not have to worry about picking the best stocks every month or every year. It’s a much more stress-free style of investing. It will save you thousands in fees and it
will actually give your investing strategy direction. Now there’s a lot that goes into that goals-based
strategy so don’t forget to click through and sign up for that free webinar where I’ll
detail it entirely. I’ll show you how to get started and how
to manage your own investments. In about half an hour, I can show you how
to be successful investing and how to manage your portfolio on just a few hours a year. We’re here Mondays and Wednesdays with the
best videos on beating debt, making more money and making your money work for you. If you’ve got a question about money, just
scroll down and ask it in the comments and we’ll answer it in a video.

Paul Whisler

18 Comments

  1. What's your favorite investing strategy? Dividends? Growth? Value? Goals-Based?…

  2. I am dividend investor but combined it with value investing. I always looking at the intrinsic value of a company before I buy into a company.

  3. Joseph, I love the piratical overview of these strategies, however, I think my favorite part about this particular video is that you are giving people a way to take the stress out of investing. That my friend is worth its weight in gold. Great video šŸ™‚

  4. Never fully understand P/E ratio until recently. Appreciate all the insight šŸ‘Œ

  5. Thank-you for the overview of strategies.Its useful to see tradeoffs in valuation, growth, and cash flow in the returns-based strategies. Dividend growth investing for my portfolio of individual stocks. DCA-based accumulation of market and sector ETFs for my foundational portfolio.

  6. Great video! When I have family and friends that approach me about how I invest and they want to jump into it right away I try to slow them down and help them understand the different types of strategies and trade offs. Good overview, in my opinion this is what all beginners need to identify first! šŸ’ŖšŸ½

  7. Joseph………you mention mutual funds………….
    what about the hidden costs of mutual funds?
    Iam fron Neuquen, Patagonia Argentina

  8. So do you buy multiple shares of ETF's of you dont want to track each stock individually or just one share will do ?

  9. How does interest work in bank accounts Joseph?
    I am opening a checking account in NBKC and it says 1.01 APY.
    When does it get paid out?
    Can I utilize it like a dividend and deposit the most on a given date for maximum profit?

    Thank you

  10. Love the chess pieces you put in the thumbnail. I think chess is a great analogy to the stock market. (Or maybe I am biased because I play a lot of chess haha)

  11. It can be risky to try and pick value over growth or large v small cap etc. Allocating across multiple asset classes is boring but so is building wealth over the long term.

  12. Your channel is becoming one of my favorites on YouTube. Keep up the good work!! Please do a video on your updated view of Alerian MLP ETF if you have one. I own 500 shares currently and wondering if this is a long term hold position.

  13. If everyone is trying to beat the S&P500 and usually fail common sense says just invest around 75-80% of your money in the S&P500. Use the other 25-20% to invest in high risk big return stocks. Very simple guys lol

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