Secret 15THE 60% RULE

Even with all the predictive tools we have presented, the markets

still approach randomness, at least for the regular investor.

Unfortunately, a high percentage of investors believe they can predict

the markets even though they can’t. Yes, Lady Luck will make

many investors think they have a crystal ball at least for a while,

but in the end most will pay the piper.

Over the next two decades, as computers become more intelligent

and even surpass human intelligence, most news and future

events will be discounted in the markets long before they

will occur. Hence, the only factors that will move the market and

stock prices will be surprising unpredictable events.

Thus, the investor is better off to assume that the markets

move randomly than to believe that he can predict the unpredictable.

In fact, the stronger you think that an event is likely to

occur, the more likely that you will be wrong.

When everyone believes in my prediction of the future, I

know I’m in trouble.

Based on this premise and knowing that the predictive tools

that I have presented only give me an edge, not a certainty, I always

apply my 60% rule to my predictions of what a stock or

commodity or the market will do. That rule assumes that I will

only be right 60% of the time no matter how I feel about a position

or projection. The rule forces me to design option strategies

that will pay off even if I am only right 60% or less of the time.

Most investors think they can outguess what stocks and the

market will do. However, since 90% of the money managers can’t

beat the market and the indexes, investors would be wiser to assume

the markets are random and invest accordingly.

The best way to invest in stocks is to buy a low-fee index

fund or an exchange- traded index such as the Nasdaq 100 (QQQ)

or the S&P 500 (SPY), and do this by dollar averaging; in other

words, putting the same number of dollars in the market each

month (probably in the third week of the month). Then you are

participating in the long term growth of stocks without having to

predict what will happen next week or next month, for once you

try to time the markets, you are doomed.

Remember, in the long run, you will probably only be right

at the most 60% of the time, so adjust your strategies accordingly.

The beauty of options is that if you design the right strategies,

you can be wrong about the markets often and still profit.

Even with all the predictive tools we have presented, the markets

still approach randomness, at least for the regular investor.

Unfortunately, a high percentage of investors believe they can predict

the markets even though they can’t. Yes, Lady Luck will make

many investors think they have a crystal ball at least for a while,

but in the end most will pay the piper.

Over the next two decades, as computers become more intelligent

and even surpass human intelligence, most news and future

events will be discounted in the markets long before they

will occur. Hence, the only factors that will move the market and

stock prices will be surprising unpredictable events.

Thus, the investor is better off to assume that the markets

move randomly than to believe that he can predict the unpredictable.

In fact, the stronger you think that an event is likely to

occur, the more likely that you will be wrong.

When everyone believes in my prediction of the future, I

know I’m in trouble.

Based on this premise and knowing that the predictive tools

that I have presented only give me an edge, not a certainty, I always

apply my 60% rule to my predictions of what a stock or

commodity or the market will do. That rule assumes that I will

only be right 60% of the time no matter how I feel about a position

or projection. The rule forces me to design option strategies

that will pay off even if I am only right 60% or less of the time.

Most investors think they can outguess what stocks and the

market will do. However, since 90% of the money managers can’t

beat the market and the indexes, investors would be wiser to assume

the markets are random and invest accordingly.

The best way to invest in stocks is to buy a low-fee index

fund or an exchange- traded index such as the Nasdaq 100 (QQQ)

or the S&P 500 (SPY), and do this by dollar averaging; in other

words, putting the same number of dollars in the market each

month (probably in the third week of the month). Then you are

participating in the long term growth of stocks without having to

predict what will happen next week or next month, for once you

try to time the markets, you are doomed.

Remember, in the long run, you will probably only be right

at the most 60% of the time, so adjust your strategies accordingly.

The beauty of options is that if you design the right strategies,

you can be wrong about the markets often and still profit.