20 Jan The Easiest Way to Beat the Market
The Easiest Way to Beat the Market
Jan. 20, 2025
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I’ve never been able to get Nicolas Darvas out of my head.
Twenty years ago, I was a Warren Buffett acolyte and wouldn’t think of investing one penny in anything that wasn’t a “great company at a great price”.
But I noticed a weird thing after a while: stocks on sale tend to stay on sale.
Searching maniacally for value stocks didn’t really pay off.
(I can’t believe my keyboard hasn’t exploded into flames for writing that.)
Then about fifteen years ago, I became obsessed with technical analysis. To me, it was vastly superior to fundamental analysis. I literally spent thousands of hours learning and testing indicators.
And that seemed to work better.
But none of that allowed me to make $21 million like Nicolas Darvas did. ($2 million in 1959 is $21 million now).
That’s why I’m still haunted by him.
And his magical system of picking stocks.
Do you remember what Nicolas did?
He tried fundamental analysis. It failed.
He tried hot stock tips. It failed.
In fact, everything he tried failed.
He nearly gave up.
Until he found the magic secret:
Buying things that were going up.
If a stock was going up, here’s what he found–it kept going up.
Yes, he created his Darvas box but, to me, that wasn’t really his breakthrough.
He immediately started winning when he only bought things that were already rising.
That was his breakthrough.
So, over a year ago, I started tracking a bunch of stock portfolios. I’m tracking about 90 different ones currently.
I have portfolios on deep value, regular value, high analyst buy ratings, high analyst sell ratings, low P/Es, multiple scans from famous people, and a lot more.
But I created two by myself.
They were easy.
All I did was look for ETFs that had beaten the market for at least 5 years.
That’s it.
No special rules. I just wanted things that had already gone up.
Because momentum seems to be the most real thing out there.
Is it, though? How have my criminally simple portfolios done since January 14, 2024?
Here’s the portfolio of ETFs over the past year:
The portfolio beat the market handily, by 7%. The ETFs that have gone up in a superior fashion previously…have done the same thing.
Here’s that group over the past 5 years:
They’ve killed the market over 5 years and continue to do so.
But what about stocks?
Choosing stocks could lead down a massive rabbit hole, so I kept it easy. I only looked for Large Caps that have beaten the market over the past 5-10 years. How did this group do?
I think you know.
These crushed the market by an even bigger margin (15%). And over the past ten years?
This group of stocks has returned over 1,000% while SPY is around 220%.
It’s not even close.
And all these portfolios do is trade using Darvas’ simple breakthrough.
Just buy-and-hold things that have already gone up and have already achieved the goal you want to achieve.
Talk to you soon.
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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.
HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.