How to make money in the stock market?

The single most important answer is: STOP TRYING!

Thousand of pages have been written about the remote possibilitiy of even a professional investment manager getting a return higher than market return in the long term (+10 years?).

The most basic idea that any investor must understand is that the stock market is a zero sum game. In order to win more than the market average return there has to be another entity loosing the same amount money.

Let's do a reality check:

1. Do you belong to the top 1% smarter people of the financial world?
2. Do you have access to the same information than top investment bankers?
3. Does your computer has the power of large investment banking systems?
4. Do you see the future? Do have a crystal ball?

If you answer is NO to these questions, then again: STOP TRYING! Your chances of beating the market are non-existent.

However, there are some alternatives:

• Become a stock broker, you will not become rich with your investments but you will with the fees you charge to those that did not read this line
• Go to wikipedia, learn what a Ponzi Scheme is and duplicate Madoff fraud, just try to disappear before the scheme is discovered
• Go to a top business school, make solid networking and start a ***** company (i.e. Enr***, Worldc***,etc), you get the idea

Now, even if you are able to get a investment return higher than the market, I suggest you check your numbers:

• Did you deduct the fees from your broker?
• Did you deduct taxes on your investments?

So, unless you are some sort of accountant crook, focus on long term investment, diversify your asset allocation and forget about timing the market.

If you prefer to get the same advice from a "recognized authority in the subject", then read:

1. Common Sense on Mutual Funds by John C. Bogle
2. The Intelligent Asset Allocator by William Bernstein
3. The Four Pillar of Investing by William Bernstein
4. A Random Walk Down Wall Stree by Burton Malkiel
5. The Gone Fishin' Portfolio: Get Wise, Get Wealthy...and Get on With Your Life by Alexander Green

An interesting source of information on investment theory can be found at:

An Introduction to Investment Theory, Prof. William N. Goetzmann, Yale School of Management

Hope this help, you may not become richer but at least you will stop becoming poorer by loosing money and/or paying fees, and you will free up some time to earn more money or spend it with your family.

What is wrong with Strategic Planning?

While reading Blue Oceans Strategies I was finally able to understand what was that bothering concern that I have after participating in several Strategic Planning activities. My naive expectation about Strategic Planning was a "creative" exercise where growth alternatives are considered with a long term perspective and critical & meaningful changes are evaluated. However, the more I am involved the more I realize that the whole exercise has become a mere justification of what has been done and keeping business with minimum change of direction.
The main consequence of this situation is creating the following issues:
- Companies do not drive real innovation in their businesses
- Financial performance is market average at best. If you do not do solid innovation you cannot leap the market for too long, the power of mean will drag you down after being on the top
- As people stay in the companies their brains stop thinking "outside" the box and becomes more effective on "telling" the story as every body wants to here it

Industrial companies organizations have a significant amount of engineers in their structures so the company organization is a blend of engineer's ADN. Engineering education in most countries is developed around finding an effective ways of performing a task or designing a widget. You may say that successful engineers are those that can understand how a "system" works, can improve it and can make it work efficiently. When this methodology is applied to a strategic planning effort, "engineers" (now executives) will be driven to apply the same methodology, find what it works, make it more efficient and make it happen.
While this may be effective for a short term strategy, when trying to improve long term perfomance you loose the diversity of new opportunities. This is increased when 80% of the effort is focusing on the "planning" piece of the "strategic planning" process.
Planning is where engineers are comfortable:

• it is about numbers that justify a result
• risk of failure is quantified as a probability of success and net present value.