- High liquidity and low transaction fees
– For a minimal $5 fee, you can sell your business stake at any moment. This is very valuable in the case where you find a better investment or just need some cash to pay for obligations.
- Ability to diversify in many businesses even with very small amount of capital
– Unlike real estate or farmland, you can be diversified even if you don’t have millions of dollars to invest.
- Quarterly financial data that we can analyze
– The SEC’s job is protecting investors against frauds and making sure financial statements reflect the truth. Our job is to look at those statements and make our own idea of how much the business is worth, look at current stock prices to gauge undervaluation level, and then compare the price/quality ratio to other opportunities in order to invest in the most undervalued ones.
- Very large selection of opportunities to compare and choose from
– You have over 5,000 businesses to compare and choose from. The more businesses you compare, the better are the deals in the best opportunities you find.
- Top opportunities can be found easily (especially with MagicFormulaInvesting.com)
– You can instantly find the top 5% of investment opportunities with the help of a PC, the internet and the right valuation technology. The reality is that you cannot estimate how much something is worth without making comparisons. This is why stock ranking systems are so powerful compared to simple stock screeners. They are good at identifying the best relative value while leaving emotions on the side.
- Long term focus is well rewarded
– As long as you have a long term horizon, you can profit from other people's fear and greed. Most of the capital in wall street is allocated with a short term focus. That’s because recent performance is what attracts most market participants. A lot of participants tend to chase returns mindlessly. This creates room for outperformance by participating in the unpopular investments that went down recently. Those investment are often sold (or avoided) regardless of intrinsic value. Most people prefer to allocate their capital into hot markets/investments that went up recently, even is they are probably currently overvalued.
- Ability to re-invest small sums of capital overtime
– You don’t need to accumulate cash for years before making your next investment. At any time, you can instantly re-invest profits and money you saved in the top ranked opportunities.
I think the stock market is one of the best ways to profit from businesses, as long as we can ignore short term price fluctuations and keep focus on the long term.