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SMS №7 - What are the best stock market investment strategies? - YouTube
Channel: London Stone Investments
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hey what's up guys five ways to make
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money in the stock market if you want to
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make money
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five things that you need to know in
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this video i'm going to show you how to
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do that
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[Music]
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hey welcome brandi single understood
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investments i talk about investing
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investing like a professional showing
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you how to up your game up your ante
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and get rich in the stock market okay so
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there are there are lots of different
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rules okay lots of different strategies
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lots of different approaches and
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there's no single holy grail you can
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make money in lots of different ways in
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the stock market
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i've tried most of them some have worked
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some have failed but there are some
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basic principles
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that you've always got to adhere to so
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these are the five basic strategies that
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you've got to follow
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number one investing is a zero-sum game
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now it's important because remember
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the only way you're going to make money
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is if somebody loses money
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okay now i'm going to keep it quite
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simple and i'm not going to make it very
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complicated so
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there are ways in which everyone can
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make money but i'm going to ignore that
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for the purpose of this video so just
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assume if you're going to make money
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joe blogs your neighbors going to lose
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money so what happens is there's a
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transaction
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i'm buying someone's selling the price
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goes up well i'm
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i've made money and the person who sold
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shouldn't have sold
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because now he's technically lost money
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that he could have made
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so the idea really is this you're
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competing with others
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which is important because the person
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who has the right knowledge
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the person who understands the right
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strategy they're going to get rich
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and the other people are not going to
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get rich now here's the good news
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most people don't know what they're
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doing if you look at
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and this is not me being um you know you
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know being rude or sort of being
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slightly um
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arrogant or anything like that it's just
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a fact most people don't and if you
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don't believe me have a look at
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the website for cfd brokers so the fca
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at some point in the last couple of
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years they made it compulsory
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to have on the website a number of
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people who
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lose money trading cfds and have a look
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at the statistics and you'll see what i
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mean
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most people we're talking 75 80 85
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90 people lose money in cfds that's just
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one example
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and it's the same for foreign exchange
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and equity trading and everything else
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most people lose money because what
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happens is most people
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most market participants don't know what
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they're doing they're retail investors
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they don't have the advice don't have
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good
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strategy and so a small number of people
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who understand the market
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it's like you know it's like um shooting
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fish in
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in a barrel you know it's very very easy
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because you're you're basically
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it's you know it's as if you're playing
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chess with a with an eight-year-old you
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know the eight-year-old might be good
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but you're probably gonna win right if
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you know to play chess so this is and
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it's just because of experience you've
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got
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more time more experience more knowledge
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and and that's why i'm trying to share
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these videos so
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i can kind of even things up a little
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bit for the average guy out there
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so investing is a zero-sum game and
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once you remember that and you start
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thinking of money as energy think of it
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as energy so
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it doesn't get created wealth doesn't
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get created or produced
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it just flows from one person to the
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other now of course over the long term
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wealth can be created
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through productivity and increased
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efficiency and of course that's good for
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everybody
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but in the short term money doesn't get
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created it just gets passed over from
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don to bob to bill to jack
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to sarah and then it goes round and
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round okay so you just need to make sure
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that you're collecting all the money so
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that's the first thing
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the second thing is something called the
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return to risk ratio now
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a lot of people call it the risk to
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return ratio or return to risk ratio i i
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prefer
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the return to risk ratio so let me
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explain what that is so
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the risk to reward ratio marks the
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prospective reward
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an investors can earn for every dollar
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they risk on an investment
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of course dollar could be pound or yen
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or whatever else
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many investors use risk to reward ratios
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to compare the expected returns of
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investment
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with the amount of risk that they must
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undertake to earn those returns so let's
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use an example
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if you've got a risk to return sorry
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risk to reward ratio 1.7
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that suggests an investor is willing to
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take a risk of one dollar
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for the prospect of earning seven
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dollars alternatively a
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risk to reward ratio of one to three
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signals that an investor should expect
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to invest one dollar
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for the prospect of earning three
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dollars okay now
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why is this important because it's
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important because every investment
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whether it's a stock market investment
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bond investment foreign exchange whether
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it's a penny stock whether it's a blue
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chip doesn't matter what it is
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every single investment has a certain
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potential
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to make money you know if you're going
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to invest in bitcoin or
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in gold or silver or whatever it is you
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know you expect conservation whether
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it's 10
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or 20 or 100 and it's important that you
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understand
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that certain investments give the
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potential for much bigger returns
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and also certain companies give a
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greater level of risk
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and understand the ratio between those
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two is very very important and
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one of the main reasons people lose
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money and this again this
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goes down to the retail investors the
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novice investors who don't really know
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what they're doing
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is because they take too much risk
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relatively a small amount of reward and
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and this is very common and i speak to a
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lot of investors all the time a lot of
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clients
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and i manage their portfolios and i see
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this this trend happening all the time
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so i know it's true because i've been
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doing this for
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20 odd years because what happens is
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they
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have fixed determined variables in mind
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so for example they might say
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i want to make 10 and that's it that's
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that that's their goal 10.
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so every single investment within their
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portfolio their goal is to make 10
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but yeah if you buy a five piece stock
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that has the potential to get to 50 p
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they only want 10 percent which is crazy
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because it's as if they are
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taking a huge amount of risk but there
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are for relatively small return
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on the flip side they might buy a unit
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trust which might just about make
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temperature and it's very low risk
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but again they're expecting the same
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thing from all investments so
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understanding return to risk ratio is
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very important and the goal is
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and if you can do this you basically get
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rich very quickly
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is can you re-pivot your portfolio or
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change the stocks in your portfolio so
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that
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you can technically increase the return
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and
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reduce the risk simultaneously because
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you'll be surprised you can often do
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that
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you don't have to go for a high return
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high-risk dog
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sometimes you can go for a high return
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lower risk stock and that's the secret
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of investing so that's rule number two
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rule number three is focus on a downside
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do not think about the upside if you
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focus on the downside
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i promise you if you just worry about
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the risk just think about risk
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mitigation think about
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capital preservation think about stop
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losses think about
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um portfolio composition or think about
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diversification or
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asset allocation think about the things
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which are gonna minimize the chances of
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you losing money
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if you can do that if you just focus on
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the losses
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you give yourself an incredibly better
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opportunity of making money because the
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winners
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over time will tend to take care of
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themselves if you look at companies like
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i don't know whether it's a tech
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companies like an amazon or something
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like if you once you get a good company
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and if you don't want to trade you can
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just leave it you'll find those stocks
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will just keep going up and up and up
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and up
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now of course at some point you might
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want to sell it depends if you want to
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trade or invest
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but the point is the reason that most
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people don't make money it's not because
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the winners don't make very much money
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is because they're losers
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completely crushed that portfolio so in
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the tip and again i know this from
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personal experience because i
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manage lots of portfolios a lot of
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client portfolios for example that i see
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before they use my services i see 20
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companies or 30 companies
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and most of them do quite well and then
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they might have two
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where they've lost 80 percent and those
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80 stocks
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are the ones which completely destroy
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the overall performance of the portfolio
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so if you can just focus on their losses
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you'll be surprised now
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again what novice investors what the
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private investor market
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does is they focus too much on the
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returns they say how can i make money
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how can i make 20
[482]
how can i make 30 and what they don't
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realize is it's a very
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important concept called momentum in the
[488]
stock market
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and momentum helps prices push along
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dividend momentum we'll talk about that
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in another video
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and so really what they should do is
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shift their focus from making money
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to not losing money and this is one of
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the key things
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why i've been so successful because i
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focus on
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mitigation in fact i'm a you know i'm an
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expert in hedging so my
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80 of my time is always about how can i
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mitigate risk
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20 percent of my time is how to make
[514]
money and that is the shift
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that most people don't make right number
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four
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be a contrarian you've got to think
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differently let me give an example
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so this is this is a this is a great one
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i like this this is from uh
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warren buffett so be fearful when others
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are greeted so this is the
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um a line that he said this was going
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about 19
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i think he said this initially in 1986
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he said
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um be fearful when others are greedy
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and be greedy when others are fearful
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and warren buffet of course
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is the most revered investor
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of our generation um so what what that
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what does that mean
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well let's have a quick look here so
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when investors turns
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when investors turn greed on something
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the price may unnecessarily start
[559]
trading at higher levels
[561]
investors will not book profits don't
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take exit buy more
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buy more more and neglect what is a
[566]
right price of the asset
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on any day if any negative news came
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regarding that higher price
[573]
would that high price would become
[574]
difficult to sustain and can trigger a
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big
[576]
sharp fall so what that means is
[580]
that people with human nature you know
[583]
there's something called fomo
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fear of missing out so when the stock's
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going up and up and up people
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are fearful and they try to jump on and
[590]
so stocks get what i call
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over extended so the true valuable stock
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can be 20 30 50 80
[596]
100 above is true asset value and this
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happens a lot with the dot com if you
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remember.com
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happens a lot of the tech stocks
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high-earning multiples because people
[604]
assume
[605]
because it's going up it's going to keep
[606]
going up but you've got to do the
[608]
opposite you've got to be controlling
[609]
now
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this is quite a difficult and thing to
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master because
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it's easy for us to try and stick with
[616]
the sheep and be with the hood because
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if everyone's buying how can you how can
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you sell but
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let me show you who does sell really
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well look at goldman sachs now goldman
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sachs this was in
[626]
2007-2008 and
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in late 2007 as a mortgage crisis
[632]
gained momentum and many banks were
[633]
suffering losses now this was at the
[635]
height of the financial crash
[637]
the biggest crash since the great
[639]
depression
[640]
goldman sachs executives traded email
[644]
messages saying that they would make
[645]
some
[645]
serious money betting against the
[648]
housing market
[649]
so this is you know this this is
[653]
this is why people make money when
[655]
people when everyone thinks the market's
[657]
going up and everything's going great
[659]
if you know if you're a taxi driver or
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that when you make down the pub and say
[662]
now is a good time to invest well guess
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what
[664]
now is a good time to sell so you've got
[666]
to be confronted similarly when the
[668]
market crashes
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a lot of private investors cash in their
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portfolio and i've done this mistake as
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well so
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you know i'm not i'm not immune to this
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um but
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you learn that lesson and you do it once
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you never do it again when the market
[679]
crashes
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that's the time to be aggressive and
[682]
that's the time to move all in and move
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all your chips in so
[685]
you've got to be concerned that is how
[686]
you make money you can always make money
[688]
in the stock market the stock market is
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probably
[690]
the best or one of the best um
[692]
investment vehicles
[694]
period better than the property market
[696]
better than um
[698]
just imagine any any asset class whether
[700]
it's fixed income bonds foreign exchange
[701]
property
[702]
and you know wine fine art the stock
[705]
market has been proven
[707]
consistently to be the single best asset
[709]
class for any investment so
[710]
you're in the right place now you just
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need to tweet your strategy
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and make it count so be a constraint and
[716]
trends will always always always make
[718]
money and if you think about it
[719]
you think about rule number one
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investing a zero-sum game if there's
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only so much money in the world
[724]
and you're controlling and ninety
[726]
percent of the people are doing one
[727]
thing like so let's say they're buying
[729]
and you're the 10 who are selling going
[730]
short
[731]
what happens of course is that you take
[734]
the percentage
[735]
of the 90 percent of the wealth and
[737]
that's why controllers make so much
[738]
money so
[739]
during the 2007 everyone's making money
[741]
in 2006 everyone's
[743]
stock market's going up and up and up
[745]
and then you've got a few people here
[746]
thinking hang in a second
[748]
we think this isn't right this is this
[749]
is overextended this is too much
[751]
it's gone up too fast too quick we're
[753]
going to short so we're going to start
[754]
selling and it's difficult because of
[756]
course 90 of people say
[758]
we're buying and you've got to go
[759]
against that but if you do that and get
[761]
it right
[762]
you're going to take money from 90
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percent of the population think about
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that
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okay so that's number four and number
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five and this is really important and
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probably the most important one
[772]
invest smart not hard
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for years and years and years i've
[776]
invested hard so i've been
[778]
concentrating and looking at screens and
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eight screens a day and you know
[782]
looking at stocks and working out peer
[784]
you know price earnings ratios or
[786]
earnings per share and you know
[788]
dissecting balance sheets and you know
[790]
also
[790]
oh my god there's too much data and what
[793]
i realized when i stepped back i
[794]
realized
[795]
that strategic allocation trumps
[799]
stock selection okay let me say that
[801]
again strategic
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allocation trump's stock election
[805]
so by that what i mean is you could
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spend a lot of time
[810]
looking at one stock that one winning
[812]
stock for that mining gold mining
[814]
company in
[815]
i don't know in zambia or something
[818]
oh this is the one this is you know and
[820]
then you you can make a lot of money
[822]
right and you could
[823]
well you could lose a lot of money but
[824]
then you've got to you've got to
[825]
replicate that with
[827]
other stocks and then you've got other
[829]
you know so you've got to do that 20
[830]
times or 30 times
[832]
but the chance of you doing that and the
[833]
amount of work that you've got to put in
[835]
to get the result that you want is so
[838]
excessive it's so big
[840]
that and it it it suffers from
[842]
diminishing returns
[844]
you can't maintain that so for me to
[846]
pick one great stock and make 40
[848]
and then to replicate that is almost
[850]
impossible it's very very difficult
[852]
but guess what if i take the whole
[854]
portfolio so let's say i'm managing a
[856]
portfolio of say half a million pounds
[858]
if i take the whole portfolio and i
[859]
improve the whole portfolio
[862]
with a strategic um you know a strategy
[866]
of say 10 percent that 10 now will make
[868]
another fifty thousand pounds on the
[870]
whole portfolio
[871]
rather than try and make forty or fifty
[873]
percent on a ten thousand pound
[875]
investment as part of it so for example
[877]
and i'll do another video on this again
[878]
there's an optimal number of companies
[880]
having a portfolio which is around
[882]
twenty
[883]
it's called capm asset pricing model
[886]
so many people i speak to some people i
[888]
see they've they've got a portfolio
[889]
maybe 100 or 200 companies
[891]
if you look at the the warren buffett
[894]
for example if you look at
[895]
berkshire hathaway you'll see the number
[896]
of companies in the portfolio it's about
[898]
20
[899]
the other i mean i think it's got 30 or
[900]
40 in total but the other
[902]
you know the other 10 or 20 x's
[904]
represents a very small percent of the
[906]
total portfolio so
[907]
about 90 of the portfolio is within
[909]
about 20 companies
[910]
there's a reason for that it is
[912]
mathematically proven
[914]
that is the right level of
[915]
diversification now this is just
[917]
strategic
[917]
it's just it's just a fact and that's
[920]
why you can get rich because if you
[922]
invest smart
[923]
and not hard so don't just you know you
[925]
don't be a busy fool just sort of
[927]
you know eight hours a day and you know
[929]
you spend eight hours a day
[930]
looking at the screens you're spending
[932]
too much time you could spend
[934]
eight minutes today and get better
[935]
results so invest smart
[937]
not hard okay i hope you found that
[939]
useful look if you like the stuff i'm
[941]
doing
[942]
make sure you subscribe and comment in
[944]
the section and tell me what it is that
[945]
you want to learn about now i'm here to
[947]
help you to serve you
[948]
to make money in the stock market that's
[950]
what i do sort of what i've been doing
[951]
for
[952]
20 25 years now my first trade was about
[955]
30 years ago so
[956]
you know let me know i hopefully i'm
[958]
going to be able to help you hope you
[960]
enjoy it subscribe like share
[962]
and i'll see you on the next video
[975]
you
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