I spend too many hours each day scouring the internet for various articles pertaining to personal finance and the economy. Yahoo! Finance often assists by aggregating useful information for me. It is the useless information, however, that has inspired me today.
In the article Cliff May Knock Out December Rally, the author writes:
In normal times, next week’s slew of U.S. economic data could be a springboard for a December rally in the stock market. December is historically a strong month for markets. The S&P 500 has risen 16 times in the past 20 years during the month.
Think back to the last time you walked into a Casino. When you step up to a Roulette table, you’ll notice the recent results are highlighted. This simple detail severely affects our psychology. If it’s landed on red 3 consecutive spins, we naturally think the next roll has to be black (even though the odds are still 50/50).
In the same way, the author of the above quote points out an irrelevant fact. “December is historically a strong month for markets.” If stocks have risen 16 times in the past 20 years, can’t I just invest in December to guarantee great returns?
Absolutely! It’s that easy!
Who wants to spend all their time researching a company to truly understand whether or not it’s a good investment? Nobody! That’s why I’m bringing to you 3 “Easy Button” strategies to get the ridiculous returns you deserve!
The High Yield Method
Buy equal dollar amounts of the ten Dow stocks with the highest yield and hold them for one year. When the year is over, re-rank the stocks and sell any that have fallen out of the top 10. Replace these with the new high-yielding stocks.
Between the years of 1974-1999, this approach would have given you an annual return of 18%. In other words, your $10,000 would have grown to a whopping $625,000.
The High Yield/Low Price Method
This strategy was initially developed by Michael O’Higgins, author of Beating The Dow. Use the list of High Yielders above then rank them by price. By finding the five cheapest stocks, you’re guaranteed to win!
Between the years of 1974-1999, this approach has returned 19.4% annually! With minimal effort, how can you beat that?
The Foolish Four
Take the five Dow stocks with the lowest prices and highest yields. Get rid of the one with the lowest price. Now put 40% of your money in the stock with the 2nd lowest price. Next put 20% in the three remaining stocks. Much the same as the High Yield Method, after one year re-sort the Dow the same way and reset your stocks.
It’s a little more complicated but it’s still relatively simple right? No complex equations or time-consuming research. Even if it takes a minute longer than the strategies above, the extra minute will be worth it.
Between 1974-1999, this formula has produced an astonishing annual return of 24.5%. Your initial investment of $10,000 has grown to $2.4 million!
With this kind of cash you’ll be able to buy Staples and reinvent the Easy Button.
The Truth Behind The Numbers
If you research any of the above strategies, you will quickly find some new disclaimers. The Fool.com specifically states that “Additional research has shown that investors cannot expect such high returns from these strategies in the future,” and you see this because investing is not easy. Every so often someone will develop either a “get rich quick” scheme that requires minimal effort but they all fade eventually.
With the help of hindsight, anyone can reverse engineer their way into figuring out “what we should’ve done.”