The Biggest Lesson I Learned While Earning a PhD in Finance

Doc's note: Being a good investor doesn't have to be complicated. And you don't have to be an "expert" to make money.

Today, Dr. Steve Sjuggerud explains the one thing you need to know about becoming a better investor...

"If my professors are so smart, why aren't they rich?"

It's a question I asked myself over and over as I worked through school.

My undergraduate degree was in finance. Then I got an MBA. And I finished my PhD in finance while working as a broker.

I spent plenty of time in classrooms, learning about the world of finance. My professors always seemed to make things simple. They explained the world of finance and how people got rich in a regimented, simple way.

It never made sense to me, considering how messy the world actually is... and seemed to me, even back then. Plus, I kept asking myself that question...

If things really were this simple, why were these folks teaching? Why weren't they out there getting rich themselves?

Today, I'll share the answer I learned along the way... and most important, how it shaped my investing.

To make it simple, my professors weren't getting rich because the "efficient markets theory" was all the rage at the time...

The theory was that you can't predict future stock prices because all the information known about stocks today is already baked into the current price.

I understood what they meant when they said this. But I'd also been studying the history of finance. And I knew there were plenty of guys who were beating the market... year after year.

So I decided that if I wanted to make money in the markets, I needed to learn from the right people. Not my professors who said it couldn't be done... but the guys who had actually done it and consistently succeeded.

What I found is that while many of the best traders use different strategies, there's something that unifies almost all of them. I got my first glimpse of it in 1990...

That's when I read Martin Zweig's book Winning on Wall Street. The book's subtitle is How to Spot Market Trends Early, Which Stocks to Pick, and When to Buy and Sell for Peak Profits and Minimum Risk.

He built many simple systems that either beat the market or (more typically) equaled the market's return – but with a lot lower risk.

Zweig wasn't the first to do this... But he found me at the right time. And I started building systems, too.

As my longtime readers know, I have a mathematical mind. And the math that Zweig outlined made sense to me...

He showed that you could consistently outperform using plenty of different strategies... from buying cheap to focusing on return on equity to simply following the trend. The key was finding what worked for you... and sticking with it.

All I had to do was keep it simple... and keep it logical. The goal was to beat – or at least tie – the markets while taking a lot less risk.

Basically, what I found was that Zweig was right and my professors were wrong...

My professors said you couldn't beat the markets... that they were so efficient, nobody could generate above-average returns. But I've spent decades building an investment system that does just that.

Study any successful investor, and you'll find something similar... an investment system that helps them sort through mountains of information to make decisions. There are plenty of different ways the best investors do it. But in all cases, a system is in place, guiding them through.

Good investing,


P.S. Today, I am the most bullish I've been all year. As my longtime readers likely know, I can drill down my investing approach to three basic criteria. And though this may surprise you, we have all three today – in spades.

Recently, I joined my colleagues Doc and Dan Ferris to detail my three basic criteria and reveal where I'm seeing good signs for stocks in the short term.

If you miss our discussion on what happening in the markets and what you should do about it, click here to watch now.