The Key To Beating The Stock Market Averages

Beating the stock market averages is every investor’s goal.  While some investors pay a great amount of money for stock market advice in their effort to beat the stock market averages, beating the stock market averages is not terribly complicated, and does not require a lot of expensive investment advice.

The strategies employed to beat the stock market averages depend upon what type of investments an investor makes in the stock market.  The key to beating the stock market averages is to research stock market investments thoroughly before investing to find stock market investments that have a track record of consistently beating the stock market averages.  This may sound like common sense; however, far too many investors do not heed this time tested investing advice, and rather invest based on a story or a sales pitch or the latest investment fad.

Beating The Stock Market Averages In Stocks and Mutual Funds

Beating the stock market averages while investing in stocks can be accomplished using one of two approaches.  If one is a conservative investor, then finding dividend paying stocks, especially preferred stocks, offers the best chance of beating the stock market averages.  This is because approximately half of the stock market returns that are earned over long periods of time are actually due to dividend payments, rather than stock price gains.  If one is an aggressive investor, then finding stocks that have high earnings growth rates, offers the best chance of beating the stock market averages.  This is because stocks that usually make market-beating gains are the ones with high earnings growth rates that attract new investors who drive the stock prices higher.

For investors that are invested in the stock market via mutual funds, beating the stock market averages requires research regarding mutual fund returns versus their bench mark tracking averages.  A not so well known stock market fact is that up to three quarters of all mutual funds fail to beat their bench mark tracking averages in a calendar year.  While past performance is no guarantee of future returns, the likelihood of beating the stock market averages while investing in mutual funds can be greatly increased, if one is invested in mutual funds that have a track record of consistently beating their bench mark tracking averages.

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