There are many ways to skin a cat, sure…
…but it seems nothing is working for Australia's technical stock market investors.
In fact, a recent study conducted by researchers at New Zealand's Massey University found that:
"Over 5,000 popular technical trading rules are not consistently profitable in the 49 country indices that comprise the Morgan Stanley Capital Index once data snooping is accounted for."
I know what you're thinking…
So you're telling me all those tea-leaf reading, candle-burning, resistance-chart-building seminars were for nothing?
Absolutely.
That's exactly what I'm saying.
As Motley Fool Share Advisor's, Scott Phillips, recently showed me, the only chart that should help Australians pick wonderful, wealth-building investments is this one…
Source: Vanguard
That's a chart from Vanguard, a company that specialises in index funds.
It says that $10,000 invested in the Australian stock market in January 1970 would be worth $761,040 today!
Just $10,000!
In an index fund!
Woah. Woah. Woah. Hold up, hold up.
What is an index fund? I hear you ask.
An index fund simply pools money from investors (like you and I) and invests in the companies that make up an entire stock market index.
You can buy index funds to track the likes of the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) or the USA's S&P500.
So what's the moral of the story?
It's quite simple really: Invest long term.
Buy stocks in great companies with an ideal holding period of forever…
No candlesticks.
No resistance levels.
No hair loss.
And certainly no secret source code hidden behind the paywalls of a technology-cum-finance company incorporated in the Bermuda Triangle.
Just plain old fashioned, boring, long-term investing.
Simple.
Let's go one better
Unfortunately, according to Columbia University professor, Bruce Greenwald, 70% of "active" investors are believed to perform worse than "passive" investors. That is, those who simply buy a market index.
But let's face it. Who's got that long to invest, right?
I mean, c'mon, 45 years from now, I'll be long gone.
Fair enough.
But the way I see it, there're only two ways you can do better than what the stock market dictates:
- Buy a time machine
- Make market-beating investments
I'm going with option two.
And I know the risks: As Greenwald said, only 30% beat the market.
But I guess I'm onto a good thing with Scott.
The stock-picking service he runs, Motley Fool Share Advisor, is quietly THUMPING the market.
I'm tagging along for the ride.
Here are some of my favourite picks from Scott…
Corporate Travel Management Ltd (ASX: CTD) – up 374% in the past three years
Sirtex Medical Limited (ASX: SRX) – up 476% since April 2012
Premier Investments Limited (ASX: PMV) – up 107% in just over two years
The stock market whisperer
Of course, it's not always going to be smooth sailing.
And the market swings erratically more often than not, bucking off seasick investors who lose sight of the horizon.
However, even if my portfolio's returns are one day awash with red ink, I'll gladly get back on this horse, and keep riding.
After all, with interest rates this low, the stock market is the only game in town worth playing.
