20 Hard and Fast Rules to Help You Beat the Stock Market
By Simon Thompson.
I got this book from the library and kept putting it off to read. However, once I did start, I’m very glad I did. I HIGHLY recommend reading this if you are a trader of any sorts.
The Dogs of the S&P
This is the simplest investment strategy and also one of the most profitable.
On October 1st of each year, buy the 10 worst performing stocks in the S&P 500 based on their price performance over the last 3 years.
Sell on December 31st.
Over the last 10 years the average gain has been 23%! In just 3 months!
At times, holding during January also provides significant returns. However, the author suggests using stop limit sell orders since these stocks could quickly lose their gains.
NOTE there is bankruptcy risk here.
Why does this happen? US fiscal year end is September 30th. Fund managers are judged based on their performance during the year. They don’t want to show that they are holding dud stocks, so they sell them before they have to report that they own them.
Other fund managers don’t want to buy them for the same reason – reports showing you own one of the worst performing stocks in the S&P…. so they too stay away.
Thus these stocks are exceptionally under valued as of October 1st.
Another strategy? Do the exact same thing for the FTSE All Share Index during December and sell at the end of January.