Masters Series: The Massive Myth About the Economy and the Stock Market
Editor's note: Most investors think the economy needs to be doing well to make money in stocks. That's not the case at all...
Yesterday, True Wealth Systems editor Dr. Steve Sjuggerud debunked a common misconception about making money in the market.
In today's edition of our weekend Masters Series – previously published in the May 14 issue of our free e-letter DailyWealth – Steve takes on one of the most pervasive myths in investing: The best time to own stocks.
His advice might sound counterintuitive, but history shows it's absolutely true...
The Massive Myth About the Economy and the Stock Market
By Steve Sjuggerud, editor, True Wealth Systems
You hear it every day. Too bad it's completely wrong...
Every day on the financial news, you hear "the economy is doing better, so stocks should do better" or words to that effect.
It sounds like sensible advice... What could be wrong with that?
If the economy is doing better, companies should be making more money, right? And if companies are making more money, their stock prices should go up, right?
It sounds like it makes sense. But that's not the way the world works...
The truth is, you want to buy when things look bad. That's when you make the most money.
That's not just my opinion. History shows that it's true.
The best time to own stocks, it turns out, is when the economy is shrinking. You may be surprised to hear it. But it's true.
We found this by simply comparing stock market returns with economic growth. Specifically, we looked at the S&P 500 index for stocks and the U.S. gross domestic product (GDP) for the economy. U.S. GDP data starts in 1947, so that's where we began testing.
Here's what we found...
Let's say you bought stocks at the end of any quarter when times were bad (when the economy was shrinking), and then you held stocks for the next 12 months.
You may be surprised to learn that you would have done incredibly well – the return in those periods was more than twice the return of "buy and hold" investing over all periods.
The opposite is true as well... When the economy is doing extremely well, you actually make significantly less money than the "buy and hold" method.
You've seen this idea at work over the past few years...
The recent recession bottomed in mid-2009, right as U.S. stocks began their historic rise.
Back then, "experts" said stocks couldn't rise because of the bad economy. They were wrong, of course. And once the economy boomed again, the experts on TV told you it was time to buy. They are wrong once again.
Most investors think that you need the economy to be doing well to make money in stocks.
They have no idea that the opposite is true.
It's one of the most pervasive myths in investing. Don't fall for it. Instead...
Please remember that this is the truth: You make the biggest gains in stocks by buying during recessions – when the economy is doing poorly. And stocks make their smallest gains when the economy is absolutely booming.
It might sound counterintuitive... but it's absolutely true.
Don't forget it!
Good investing,
Steve
Editor's note: Dr. Steve Sjuggerud provides timeless investing secrets like the ones we've featured this weekend every month in his True Wealth Systems advisory. He also uses a new type of proprietary computer software – which took four years and nearly $1 million to develop – to access little-known, high-upside investment ideas that were previously off limits outside Wall Street.
You can learn all the details about this system and Steve's incredible success rate with a risk-free trial subscription to True Wealth Systems. If you sign up before midnight tonight, you'll receive Steve's advice FREE for three months… an incredible bargain for one of our most exclusive, sophisticated research letters. Click here to learn more.