From the pen of Karin Iten…

Dear Investment Academy Reader,

Getting it right in the world of investing doesn’t have to be hard… you just need to have a plan. I have just the person to help you set yours up.

Dr. Steve Sjuggerud specialises in safe, unique investments that have been overlooked by mainstream media, including gold coins, Japanese real estate, timberland, and Icelandic bonds. He’s also the co-author of Safe Strategies for Financial Freedom, a best-selling book on investment strategies. And today he’s going to help you become a better investor.

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Over to you Steve…

14 secrets of the market wizards

Who would you put your money on in a hot dog eating contest: Eric “Badlands” Booker, a 410-pound New York City subway conductor, or Takeru Kobayashi, a 112-pounder from Japan?

At Nathan’s Famous Fourth of July Hot Dog Eating Contest a few years back, Mr. Booker put on an astounding show. He was able to eat an unbelievable 26 Nathan’s hot dogs – buns and all – in the allotted 12 minutes.

But Mr. Booker wasn’t the winner.

Takeru “The Tsunami” Kobayashi was.

You see, the 24-year old lightweight from Japan was able to eat 50½ hot dogs – buns and all – in 12 minutes, breaking his previous record – set the year before – of 50.

You’re probably thinking “that’s interesting Steve, but what the heck does it have to do with making triple-digit returns?” Well let me explain...

Today, I want to be less sobering and more optimistic...

And I want to say that TRIPLE-DIGIT RETURNS ARE TRULY POSSIBLE...

Jack Schwager reminded me of this while I was reading the book Stock Market Wizards. As I read this book, I came to realise that there are many “Tsunami” Kobayashi’s out there in the investment world.

Jack Schwager has interviewed dozens of them for his “Wizards” books. At the end of his latest book, he lists the traits of these successful stock market wizards, hardly any of them household names.

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14 traits of the world’s most successful stock market investors

1. There’s no single path for success:
Some people buy cheap stocks. Some people buy momentum stocks near highs. Some are purely quantitative; some go by a degree of instinct. And yet, all of their strategies pan out in the end. The trick is to find what works for you…

2. Discipline is key:
The sequence seems to be: Find a system that works for you, address all contingencies and follow that plan without exception. This includes knowing what risks you will and won’t take, what shares you’ll invest in and what strategies you’ll put in place to avoid being taken to the cleaners.

3. Stick with what works for you:
If you can’t stand risk for example, don’t trade derivative vehicles like spreads or futures. You have to have your own investment philosophy that fits with your own personality. If you’re conservative, embrace it and use it to get the best out of your investment capital.

4. There’s no substitute for perseverance, time and hard work:
Most good investors had horrible starts, making every mistake in the book. You can’t become a doctor or a lawyer overnight – nor can you become a Market Wizard overnight either. But if you dig in, you can get there. Most of the Wizards bordered on obsession.

5. Know your edge:
If you don’t have one, chances are triple-digit returns will be tough to come by.

6. Be confident:
The best investors know they’ll succeed before they even put the money on the table.

7. You have to be willing to take a loss:
We’ve covered this many times in this space.

8. Risk control is key:
You can never risk having a catastrophic loss. Limiting positions to 4% of capital is the safest way to do this.

9. When in doubt, get out:
If the market doesn’t do what it’s supposed to, don’t raise your bets... get out.

10. Be patient:
You don’t NEED to be fully invested all the time. If there are no attractive investments available at a particular time, there’s nothing wrong with waiting for one to develop.

11. Don’t worry about looking stupid:
If being contrary to the crowd earns you bigger profits, who cares what the other person thinks.

12. Beware of your ego and don’t get emotionally involved:
Don’t go down with the ship trying to prove you’re right, and don’t fall in love with a stock. Emotional involvement NEVER helps performance.

13. Complexity isn’t necessary for success:
If it was, technical analysis would be all that’s used and brokers would be among the smartest people in the world – which we know isn’t the case.

14. Look for only low-risk opportunities:
Ideally, you want a three-to-one reward-to-risk ratio. So if you use a 25% trailing stop, you’d better be expecting a 75% gain.

Many of these characteristics are a blueprint for success in any field, not just investing. If you aren’t willing to do these things, chances are you’re looking at a best-case scenario of 6%-7% a year returns on your investments over the coming decade.

If, however, you’re willing to commit wholeheartedly and go down a path less-traveled, then you have the chance for considerably better results – even triple-digit returns like these stock market wizards above.

Eric Booker approached his hot dogs like your typical big mutual fund company approaches the market: In a very conventional way. Mr. Booker was simply hoping his 410-pound size would help him win. Like the blue-chip giants out there, Mr. Booker will always do well, but he’ll never win...

For Mr. Kobayashi, at 112 pounds, he knew that he couldn’t approach the hot dogs in the conventional way. He had to use everything in his power he could just to have a chance.

Go back and re-read the list above from Mr. Kobayashi’s perspective. These tips apply to winning a hot dog eating contest just as easily as they apply to investing.

Implement these secrets as much as possible in your own investing and you too can achieve extraordinary results.

Good investing,

Steve Sjuggerud
For the Investment Academy