How To Really Ruin Your Financial Life and Portfolio

Chapter 10Try Strategies That No One Else Has Ever Thought of . . . You Can Out-Think the Market

The basic John Q. Public–type might look for a time to invest when the ratio of price to earnings is low compared with trends over long historical periods. The average Janette investor might search for stocks (indexes of stocks) when the ratio of the price-to-book value of the companies in the index is low. Or, as Phil DeMuth and I (mostly Phil) have pointed out, that ordinary investor might look for times to invest when the prices of stocks are just plain lower than they have been over long recent periods.

It has been shown beyond a doubt that these are good metrics for selecting stock indexes.

Persons who buy at these times tend to make more money than persons who just buy in whenever they feel like it.

Or, the average investor might look for stocks in countries that have just gone through some natural disaster—such as the 2011 earthquake and tsunami in Japan—and note if the index of the main companies in that nation has taken a sudden fall of good size. The investor might think, “It is NOT different this time. The Japanese are an incredibly industrious people. They will rebound after this tragedy. Even with a long recession dragging them down, they will rally to at least the levels prior to the natural disaster.

Betting that there will be a reversion to the mean after a drastic deviation from the mean is usually a fine bet.

But that is way too simple for you. No, you should try ...