Narrowing the Odds
by Dr. Invest

Successful investing comes largely be observation. If the waters are troubled and swift, don't get in them; if they are calm and placid, slip in and enjoy the moment. If you see a storm coming, swim to the bank and exit. And remember that in the winter, the waters will likely be cold; and in the spring, the rains are likely to make the waters swift.

If you are capable of catching the illustration, you will understand the power of observation. There are some things that are CYCLIC. Winter... Spring... Summer... Fall   The stock market and each stock, follows simmilar cycles or patterns. Some mathmeticians see these as random numbers. Another term used is LARGE NUMBERS, so if you flip a coin long enough, you will have an equal number of heads, as tails. Given that numbers were not affected by seasons, weather, innovations, opportunity, politics, war, and many other equally complicated interactions and correlations, the LARGE NUMBER theory would be workable.

So then, how does the "little guy" narrow the odds and get an edge? You need to get the right tools to know when to fish. Look at this little chart that I published in a previous blog.



 Now this chart shows you when you are most likely to make money based on the market returns over the past 10 years. The old adage "go away in MAY and come back another day" and "the January Effect" seem to make sense when looking at this chart. So using this chart, you can define CYCLES in the stock market and increase your odds for successful investing. The "big boys" in the market will continue using sophisticated research, data, and statistics, but with a glance at the above chart you can have an advantage.

Just like you can see cycles in the OVERALL MARKET, there are also cycles in stocks. You may ask, how can I access the information of cycles on individual stocks. Well, without you paying $300 per month, you can access that information for free at Daily Finance with AOL.

Go to http://www.dailyfinance.com/lookup//usa and enter your stock symbol in the box that says, "LOOK UP SECURITY" and hit "GO".  Select in the left-hand column, "AVERAGE MONTHLY RETURNS" and wallah!  You will see the average monthly returns for that stock averaged over the past five years. Remember what I said about OBSERVATION. Likely, there is a pattern that will help you invest at the right time to make some money. If you are an active investor, you can also know when to sell before the stock declines.

Remember, there are no guarantees. Understanding cycles only gives you an additional indicator to be used with other indicators for buying and selling your investments.

(Note: the above information is for entertainment purposes only.)