Most of the time when people talk about stocks, they’re looking for “picks”—companies that are about to explode and see a sudden uptick in stock price, bringing an immediate windfall to investors.
Mark Matson and his team at Mark Matson Money do not play the picking game.
Recently invited to discuss the rising stock prices of three major pizza companies, Mark Matson’s Director of Marketing, Zack Shepard, refused to give in to the hype and excitement that other stock “gurus” feel about these companies. Pizza chains are making big money right now as they make it easier to order online. They’ve made an irresistible product and they’re riding the profits upward to higher and higher stock prices.
But Zack’s comment on this trend clove to standard Mark Matson philosophy: the only reason he likes these companies is because they’re part of a market that gains 3% a year.
In other words, it doesn’t matter to Zack—or Mark Matson—if these companies are seeing 10%, 20% or even 30% gains right now. Those short term gains are volatile and hard to predict. Even if you successfully predicted the upswing in the pizza chain niche before it happened, it could run out or reverse itself at any time for any number of reasons. Picking a winning stock is difficult, and staying with it is like trying to stay on a bull at a rodeo. You will eventually fall off.
But the market as a whole is less volatile and generally grows both more reliably and more smoothly. Instead of potentially getting a 10% return followed by an 8% loss, you have the potential to achieve 3% a year with relatively little variation by simply choosing small capital as a whole. A similar steady growth can be found with a diversified approach to almost any market.
To Mark Matson and his staff, equities are not only the most reliable and least risky approach to making money on the stock market, long term they have the potential to be the most profitable. If an investor really feels the itch to play a few promising picks, it should be with a tiny fraction of his overall investment, putting the majority into a diversified portfolio that provides the opportunity to make him money even when his favorite company blunders.