Naturally, you?re here visiting fool.com.au to learn as much as you can about the stockmarket, including information about companies, the direction of markets, and which shares should be bought, held or sold.
And you?re also managing your own money and want to, if possible, earn a return that?s greater than the market as a whole.
To emphasise an often-reasoned explanation for what ?the market? is, you need to understand that when looking at stock-market investing though the lens of a market average, you?re usually looking at, say, 200 stocks that are included because of the size and liquidity in their shares, and…
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Naturally, you’re here visiting fool.com.au to learn as much as you can about the stockmarket, including information about companies, the direction of markets, and which shares should be bought, held or sold.
And you’re also managing your own money and want to, if possible, earn a return that’s greater than the market as a whole.
To emphasise an often-reasoned explanation for what “the market” is, you need to understand that when looking at stock-market investing though the lens of a market average, you’re usually looking at, say, 200 stocks that are included because of the size and liquidity in their shares, and not because of their quality.
There’s also usually quite a disparity between the good, the bad and the ugly, in whichever index you happen to be looking at.
The proxy that I like for the market is the S&P/ASX 200 which, as of last Friday, stands at 5,431.30.
Its returns to 23 September 2016 are tabled here:
|Date||S&P/ASX 200||Return (%)|
|26 September 2015||5,042.10||7.72|
|1 January 2016||5,270.50||3.05|
|10 February 2016 (low point)||4,706.70||15.39|
|30 June 2016||5,233.40||3.78|
If you’re a long-term index investor, you can probably be satisfied by making a positive return.
If you consider yourself an investor in particular businesses though, the overall market average should be of little or no interest to you. After all, the S&P/ASX 200 index masks both terrible and excellent stock market performers.
However, if you’ve been able to follow the Foolish philosophy of investing in well-funded businesses with great prospects, you may be lucky to have outperformed the S&P/ASX200 by holding any or all of these industrial stocks below:
a2 Milk Company Ltd (Australia) (ASX: A2M), up 175.97%
Webjet Limited (ASX: WEB), up 159.03%
Altium Limited (ASX: ALU), up 113.63%
Domino’s Pizza Enterprises Ltd. (ASX: DMP), up 87.95%, and
Corporate Travel Management Ltd (ASX: CTD), up 82.43%
If you hold any of these bottom five performer stocks below, then you’ve had a bad year …
|Stock||Share price ($)||Return (%)|
|Spotless Group Holdings Ltd (ASX: SPO)||1.01||(50.00)|
|Estia Health Ltd (ASX: EHE)||3.51||(49.20)|
|Nine Entertainment Co Holdings Ltd (ASX: NEC)||0.97||(37.22)|
|Henderson Group plc (ASX: HGG)||4.09||(27.48)|
|OFX Group Ltd (ASX: OFX)||1.87||(25.70)|
And for the sake of completeness, here are the top five stocks in the S&P/ASX200 that have comprehensively beaten the market averages:
|Stock||Share price ($)||Return (%)|
|Galaxy Resources Limited (ASX: GXY)||0.305||1,029.63|
|Resolute Mining Limited (ASX: RSG)||2.19||682.14|
|St Barbara Ltd (ASX: SBM)||2.96||258.79|
|Infigen Energy Ltd (ASX: IFN)||0.825||230.00|
|Saracen Mineral Holdings Limited (ASX: SAR)||1.42||209.78|
Examining the table above, each of these stocks are resource and/or energy-related stocks, and given the smashing their respective stock prices have suffered in the years prior, you’re probably witnessing a bounce from very deep lows.
Resources and energy isn’t really my game though as, in general, these companies have no control over the price that is set for their key products.
So, what does the typical individual or self-managed superannuation fund trustee do to sort the wheat from the chaff, so to speak?
What you can and should do is to constantly educate yourself on anything stock-market-related, including companies’ annual and semi-annual reports, and other announcements to the market.
You can also consider many good how-to investment books that also cover aspects of investor psychology as well as the nuts-and-bolts of competition, regulatory threats, pricing, and customer/supplier concentration.
If this is a little dry though, you can also read professional analysis and let the experts do the research for you. Below is a report that I think you’d get a lot of benefit from.
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Motley Fool contributor Edward Vesely owns shares of Corporate Travel Management Limited. The Motley Fool Australia owns shares of A2 Milk, Altium, and Corporate Travel Management Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.