Duplex Models of Complex Systems

Binomial Framework and Case Study 

of 

Seasonal Waves in the Stock Market 

Duplex models can portray complex systems with the utmost of simplicity, clarity and efficacy. The drawcards range from the dearth of initial premises to the soundness of final conclusions. The mettle of the binomial approach shows up, for instance, in debunking the welter of myths and misconceptions that pervades the fields of finance and economics. According to the Efficient Market Hypothesis, the marketplace always reflects the totality of information available to the general public. Since every nub of know-what and know-how informs the latest prices, no single actor can improve on the valuation of assets ranging from stocks and bonds to commodities and realties. 

One consequence is the lack of trusty cues for forecasting the market: if every clue has been fully utilized, then any move henceforth has to come as a complete surprise. Another fallout lies in the Random Walk Model that pictures the path of the market as a form of Brownian motion whereby the price level is wont to shift in any direction with equal likelihood. 

Unfortunately, the Efficient credo abounds with flaws ranging from unreal assumptions and spurious concepts to inconsistent models and faulty conclusions. A counterpoint involves the wave motion of the stock market that belies the premise of utter randomness. As a recourse, a true science ought to build on hard data and staunch precepts, rigorous models and tenable results. To this end, the study at hand represents a small but fundamental step toward a coherent theory of the marketplace. 

To underscore the gulf between the mythos and reality, the work plan takes a minimalist approach. For starters, the inquest draws only on a minute fraction of the trove of information freely available at the most popular portal among the investing public. Moreover, the quantitative analysis relies solely on the simplest technique in statistical testing. From a computational stance, the attendant program invokes a skimpy subset of the built-in functions within the core module of the R system: the leading choice of programming language and software platform for data science in disparate domains. 

NOTE:  The ebook is available under the title of “Duplex Models of Complex Systems”. The document in PDF form may be downloaded from the Internet Archive or at ResearchGate. In addition, the title is distributed in EPUB format by Apple Books and other partners of Books2Read.

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MintKit Growth Index

A Benchmark of the Stock Market

for

Sprightly Growth at Modest Risk

The ideal of investment lies in a robust strategy for high growth at low risk. Granted, a perfect solution could never emerge in an imperfect world such as ours. Even so, certain approaches toward the objective make more sense than others.

By received wisdom, the leading benchmarks of the stock market are cogent and meaningful portraits of the action on the bourse. Sadly, though, the reality differs greatly from the mirage.

For starters, the renowned indexes track the stocks in the prime of their lives rather than the entirety of their lifespans. In the process, the yardsticks gloss over the fact that death is the way of life for all companies along with their equities. The outcome is a grossly distorted picture of the payoff for the entire throng of shareholders over the long range.

Even in the near term, the traditional benchmarks have little or no bearing on the mass of participants. For instance, many an index monitors a group of stocks according to their market caps.

While this approach may befit a profile of the bourse as a whole over the short run, the unbalanced scheme has scant relevance to the thoughtful investor who is most unlikely to load up their portfolios according to the market caps of the stocks at hand.

For these and other reasons, the traditional benchmarks are unsuitable as beacons for the investing public. Instead, a worthwhile index should address the true concerns of serious investors in areas ranging from pertinent metrics to workable strategies.

An example of a fruitful scheme involves the equal weighting of stocks within a benchmark. The benefits lie in conceptual elegance as well as practical relevance for the participants. Another drawcard is the tendency of uniform weighting to deliver higher returns compared to the labored scheme based on market caps.

In seeking a trusty path, a basic step is to canvass the timeworn benchmarks in multiplex areas ranging from conceptual soundness and logical rigor to common sense and pragmatic import. The wholesome assay then leads to guidelines for designing trenchant beacons suited to investors in tending their private portfolios. The enhanced framework is showcased by the MintKit Growth Index: a model benchmark geared toward promising stocks poised for zesty growth at modest risk.


NOTE: The briefing is titled, “MintKit Growth Index”. The slide presentation may be viewed as a document in PDF form or a video in MP4 mode.


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Rewards of Investing in Real Estate through Index Funds, Not Actual Properties

Higher Payoff with Less Effort

Real estate represents the greatest store of wealth for the bulk of the human population. With the exception of owning a home for personal use, however, holding a property for the purpose of investment usually entails a raft of headaches. The nettlers of this kind run the gamut from emergency repairs and maintenance costs to problematic tenants and sporadic vacancies. As a result, the net earnings usually fall a goodly amount below the gross returns reckoned in terms of the monthly rent.

On the upside, though, holding an index fund in the financial forum tends to pose far less headaches than renting out actual dwellings in the real economy. Granted, the experience of any given person could differ from that of another. Even so, many an investor enjoys a higher rate of return through an index fund for real estate than the mass of landlords can eke out by renting out actual properties in the marketplace.


NOTE: The briefing is available under the following title: “Rewards of Investing in Real Estate through Index Funds, Not Actual Properties”. The PDF document may be downloaded from MintKit Library. In addition, a capsule in the form of an infographic poster is available at MintKit Gist.

 

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Volatility Slams the Return on Index Funds

 The Return on Index Funds  

 Rises with the Aloofness of the Investor  

 and Falls with the Volatility of the Market 

A high level of volatility in the market prods investors into fiddling with their portfolios, thereby slashing the return on investment for index funds. By trading in and out of the stock market at precisely the wrong times, the fidgety players end up shooting themselves in the foot.

Over the long haul, the sprightly segments of the market are apt to outpace the other branches. The dynamic niches include bantam firms, technology ventures, and emerging regions. On the downside, though, the spry markets tend to be more roily than the rest.

Unfortunately, the investing public has a way of dashing in and out of the market at just the wrong moments. As a result, the punters give up a great deal of the gains on offer in the lusty domains. The higher the volatility, the greater in general is the lag of the investor behind the target index.

On the upside, though, there is a straightforward way for the mass of investors to boost their earnings by a significant amount. The gamers could enjoy a plump increase in profits if they would stop meddling with their portfolios and simply ignore the goings-on in the marketplace. Moreover, the benefits of a laissez-faire policy grows with the turbulence of the market, along with the flightiness of the corresponding index fund.

Read more on Volatility Slams the Return on Index Funds.

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Wildcats of Finance

Turning a Wrecking Ball into a Productive Vehicle

for Investors and Other Stakeholders

Wildcat groups such as hedge funds have played a growing role in causing or hiking blowups in the capital markets as well as the banking system. A showcase was the crisis of 2008, which ended up crippling the financial complex along with the real economy. The bombshell obliterated trillions of dollars from each of the major stock markets of the world, destroyed millions of jobs in sizable countries, and nixed trillions of dollars through lost output in the global marketplace.

This guidebook exposes the reality behind the illusion of profits in the hedge fund game. In plain language, the primer explains knotty issues like the following.

• Why do the hedge funds destroy wealth?
• How can the operators enrich themselves by delivering worse results to their customers?
• Why does the true performance of the wildcats remain hidden from view of the investing public?
• How do the custodians slash returns and hoist risk for their clients as well as the financial community and the entire society?
• Why will the crash of 2008 and the global recession in its wake show up repeatedly, and cause greater devastation, unless proper safeguards are put in place beforehand?
• How can public officials protect the stability of the markets?
• How could the economic liability of hedge funds be turned into a social asset?
• How can shrewd investors grow rather than wreck their capital?

The main audience for the book consists of active investors and earnest policymakers. Other types of readers include concerned professionals in the financial community as well as thoughtful observers in all walks of life.

Given the carnage to the real economy caused by reckless schemes in the financial sector, the message of this guidebook is in fact relevant to every member of the society at large.

Read more on Wildcats of Finance.



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How Forex Affects an ETF for Global Investment

 Showcase of Australia and Korea 

In a global marketplace, the return on investment for an exchange traded fund (ETF) depends in part on the behavior of the foreign exchange (forex) market. Whatever the type of asset, the turnout of the currency in a particular country can have a big impact on the payoff for an international investor. It makes no difference whether the investment involves a financial instrument like a stock or bond, or a tangible object such as land or housing.

Many people have the impression that equities and currencies are independent classes of assets. While that may be true in principle, it’s hardly the case in practice.

For this reason, the global investor has to consider the linkages amongst different types of assets. The forces at work are examined in connection with a couple of stark examples involving Australia and Korea. The case studies happen to involve divergent cultures and distinct time scales, but the crucial patterns crop up regardless.

Read more on How Forex Affects an ETF for Global Investment.


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Upsurge of the Index Fund and the ETF

An irony of the financial forum is that the mass of effort put into trumping the benchmarks of the market turns out to be not only feckless but in fact counterproductive. As a result, the average investor lags the market averages. The shortfall of performance applies to the corps of professional managers as well as the throng of amateur players.

For this reason, a growing number of investors have taken up the goal of simply keeping up with the market yardsticks. To this end, the express goal of an index fund is to track a benchmark of the market.

A popular type of index fund takes the form of the exchange traded fund (ETF). The advantages of the ETF lie in the cost-effectiveness of the vehicle as well as the convenience in buying and selling the shares.

Read more on Investment Funds.


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Forecast of the Stock Market and the Global Economy

Outlook for 2011 and Beyond

In contrast to common perception, the stock market and the real economy are intertwined in the present as well as the future – a linkage which can serve as the basis for forecasting. The process is illustrated by way of a timely survey: a forecast of the stock market along with the global economy for 2011 and beyond.

On the whole, the volume of economic output is likely to expand by roughly 4.5% over the year to come. The same is true of the growth rate for much of this decade.

In line with the norm, though, the expansion will be patchy rather than uniform. For instance, mature economies such as the U.S. will grow by a mere couple of percent per year after adjusting for inflation.

Furthermore, about 1% of the increase will stem from the buildup of the population due to the net flow of immigration over emigration.  In that case, the rate of productivity will creep upward by just 1% per year. The same outcome lies in store for the average level of income.

On the other hand, the spearheads in the emerging regions will gallop ahead at a blistering pace. In places such as China and India, the upsurge of economic output is set to reach 9% or more per annum.

Meanwhile, the exporters to the budding countries will fare somewhere in between the two extremes of growth. An example is found in Australia or Canada as exporters of raw materials. Another sample is Germany or Korea as suppliers of capital equipment or finished goods.

In the absence of any big surprises, the markets round the planet are destined to enjoy a refreshing upswing in 2011. Moreover, the outlook for the years to come is a bit less sparkling but still cheery even so.

On the upside, the winds of fortune smile upon the bourses of the world. During the run-up to the Presidential race, the U.S. government will whip up a storm of hubbub in a heated effort to fire up the economy.

For the most part, the hoopla will be a blast of hot air without much impact over the long range. Even so, any dumpage of money into the marketplace by way of fiscal programs or monetary schemes will serve to nudge up the volume of commercial transactions. In that case, the gush of spending is bound to be a tonic for the stock market, at least over the short and medium range.

As a result, the U.S. bourse is slated to surge by 15% or so over the course of 2011. Since the American market is a beacon for the rest of the world, the upswell will bolster other bourses throughout the planet.

Read more on Forecast of the Stock Market and the Global Economy.

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Starting Point for Investment Planning

Adapting to Change in Global Markets

The upgrowth of global markets gives rise to changing opportunities for investment planning. In this dynamic environment, an orderly approach to investing begins with a wholesome view of the big picture.

As it happens, the asset classes and market niches are interlinked rather than independent. For this reason, a grasp of the larger context provides a trusty backdrop for dealing with any portion in particular.


Making Sense of the Turmoil

The purpose of MintKit Investing is to serve as a staging area for investing in growth in a worldwide economy. To this end, the hub examines ground-breaking trends, promising opportunities, and crafty techniques across the panoply of financial markets and tangible assets.

On one hand, the full spectrum of topics covered by the hub is unlikely to interest all comers in a uniform way. Rather, some folks will lean toward certain topics rather than others.

Despite the diversity of concerns, though, a systematic view of the opportunities for growth is a useful foundation for every decision maker. Put another way, the shrewd investor keeps an open mind and considers a broad array of assets for investment.

Read more on Starting Point for Investment Planning.

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Haste Makes Waste in Investing

 Patchy Knowledge of the Markets Can Backfire

A smattering of knowledge can be more harmful than helpful for the investor. An example is a disjointed grasp of cause and effect which provokes moves that are not only feckless but detrimental. In this regard, at least, the field of investing is no different from any other domain.

In many cases, scrappy information paints a false picture of the financial arena as well as the real economy. The faulty impression sets the stage for a universal form of blunder: an overreaction by the antsy investor. A case in point is a punter who flees a foreign market in the wake of a local flap; yet a bombshell which looks menacing to the players living abroad could well be business as usual for the locals.

A second type of gaffe is a misreading of a given event due to an incomplete knowledge of the larger context. For instance, a gripping event which looks like the sign of a turning point might just be another symptom of a chronic condition.

A third form of bungling is a blind reliance on a rough guideline. As an example, the stock market is widely regarded as a harbinger of the economy at large. On the other hand, the bourse has a habit of breaking down for reasons that have nothing to do with the innate condition of the financial forum or the larger economy.

The three types of mistakes may crop up separately or jointly. In the case study presented here, the trio of goofs rocked the stock market and the local currency in Thailand.

More on Haste Makes Waste in Investing.

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Market Trends

Large-scale Trends for Competitive Strategy and Investment Planning in a Global Market

A raft of market trends play a central role in competitive strategy and investment planning in a global economy. The articles in this collection examine the large-scale forces and their multiplex offshoots in a variety of domains ranging from common stocks and foreign exchange to raw materials and emerging regions. Another core theme involves the practical import of market trends as the groundwork for ironing out a global program of competitive strategy for the enterprise as well as investment planning for the individual.

More on Market Trends.
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Armageddon in Real and Financial Markets - Regulation of Hedge Funds Driven by Speculation and Leverage

Hedge funds entered the public spotlight in 2008 for the dominant role they played in taking down the financial system and the real economy. The ensuing blowup was the greatest wipeout of wealth and the worst takedown of the global economy since the Second World War.

Until the financial crisis burst upon the scene, it was the stuff of sheer fiction to picture a single outfit or a small crew of actors that could tear apart the fabric of civilization as we know it. Yet the debacle of 2008, along with its aftershock, was the shot across the bow for a laid-back populace. On current trends, a calamity that lays waste to the trappings of modernity is not only possible but inevitable.

On the bright side, though, the outcrop of doomsday could be forestalled by a mere act of forethought along with the legislation to match. The fitting course of action would be plain, quick and wholesome.

On the other hand, the feat will be far from easy to pull off due to the mass of opposition from lobbyist groups. The sensible approach will require the courage of statesmen along with the backing of their constituents.

The recent crisis has shown that extreme levels of leverage can bring down the entire system of finance and economics. Thus far, the annihilation of wealth has amounted “merely” to trillions of dollars and millions of jobs in each of the major countries of the world.

Yet the carnage will not always remain so slight in the future. Whether the assailants happen to be hedge funds or other rabid players, it would make sense to defang the forces of armageddon before they have a chance to do some serious damage.

More on Armageddon in Real and Financial Markets - Regulation of Hedge Funds Driven by Speculation and Leverage.


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Investing

A Guide to Investing in Financial Markets and Real Assets in a Global Economy

To a growing extent, investing is a crucial aspect of everyday life in the modern era. The ranks of investors all over the world have been swelling in absolute numbers as well as relative figures compared to the population at large.

Against this backdrop, the articles in this collection are designed to provide a coherent approach to investing in a global economy. The topics at hand span the spectrum from large-scale trends and short-term patterns in the marketplace as well as hidden threats and promising strategies for the investor. Meanwhile, the types of vehicles for investment planning range from common stocks and foreign exchange to real estate and precious metals.

More on Investing.
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Financial Forecasting in Practice

 Of Human Bondage and Mental Reach in Financial Forecasting

One way or another, financial forecasting is an integral part of investment planning. Whether an outlook happens to be an explicit forecast or a vague impression, the investor has to envision the outcome downrange in order to make an intelligent decision today.

In a global market that grows ever more complex, an entire industry has sprung up to size up the prospects for assets ranging from stocks and bonds to commodities and properties. On the downside, the purveyors of forecasts have a lousy record of foretelling the market. For instance, the gurus as a group make calls that are worse than random guesses on the direction of the stock market. Remarkably, even the top tier of renowned pundits cannot match the performance of a coin toss in predicting the bourse.

On the upside, though, the market displays a variety of patterns which can help the investor in forecasting prices and managing portfolios. Admittedly, the power to predict the market is far from perfect. Even so, a limited ability to anticipate the movement of prices is far better than none at all.

A series of incisive studies by level-headed researchers has shed some light on the chaotic domain of financial markets. The findings provide a better grasp of the forces at work as well as the modes of behavior and the limits to forecasting. To a greater or lesser degree, financial prediction lies within reach for investors with little or no money to spare for oracles, and scarcely any time to devote to the task.

More on Financial Forecasting in Practice.

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Heyday of the Tiger: Last Hurrah before Korea Yields to China

As the global economy shakes off the worst recession in modern history, a host of observers have noted the resilience of Asia in general and Korea in particular. According to common perception, the economic tiger is roaring once more and has been leaping from strength to strength.

If truth be told, though, the reality is a bit more complex than that. As in centuries past, Korea is now caught in a pincer movement between the goliaths of China and Japan. Due to the squeeze from both sides, the tiger’s presence on the global stage will continue to lose its mojo over the years to come.

Granted, the slippage of the Asian tiger down the ranks is not inevitable. A ray of hope lies in the efforts of policymakers to bolster the local economy by reshaping the patterns of commercial activity and economic output.

The leading lights in Korea have joined their peers in mid-tech nations around the globe – ranging from Singapore and Malaysia to Latvia and Slovakia – in the call to move up the ladder of creativity and focus on high value-added services. The product lines on the agenda span the gamut from robotic hardware and nanotech compounds to financial services and medical tourism.

On the downside, though, the plans cooked up thus far have been squarely pedestrian and unremarkable. As a result, the initiatives on the table will not enable the nation to keep its position in the front ranks among the trading nations of the world.

Given this backdrop, the future looks cloudy for Korea. Even so, the morrow need not turn out to be bleak.

With a hefty dose of creative effort and a hearty commitment to wholesale change, the prospects downstream could look more cheery. In this sense, at least, Korea is no different from other mid-tier countries around the world.

If the tiger is to remain in the big leagues in the global forum, it will have to alter its stripes in a sweeping fashion. Sadly, though, transforming a lumbering tiger into a nimble fox is easier said than done.

In that case, the golden age of the dynamo will be on its last legs. The way things are going, the Korean tiger is slated to slide into the twilight starting in the late 2010s.

More on Heyday of the Tiger: Last Hurrah before Korea Yields to China.

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Market Timing via Monthly and Holiday Patterns

The stock market displays a medley of patterns that can be used as the basis for a timing strategy. A prime example is the frequent surge of the market around the turn of the month as well as the run-up to a holiday.

On one hand, the timing strategy does have its shortcomings. A case in point is the need to dart in and out of the market more than a dozen times a year. Another drawback is the need to deal with the tax impact of short-term rather than long-run capital gains.

In spite of the limitations, though, trading with the calendar can turn in higher profits at less risk than the mundane policy of buying stocks and holding them forever. As a result, a timing strategy based on monthly cycles and market holidays represents a free lunch on Wall Street.

More on Market Timing via Monthly and Holiday Patterns.

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Valuation of a High Growth Business

Comparing a High Growth Business to Similar Firms on the Stock Market is the Simple Approach to Valuation



The valuation of a high growth business is a key concern for the owners of the enterprise as well as outsiders such as prospective investors. As an example, a corporate buyer that plans to acquire the business has to figure out how much the entire company is worth. The same is true of a savvy investor in the stock market who wants to buy a block of shares in a listed firm.

A simple way to gauge the value of a business is to compare it to similar firms in the marketplace. The matchup against listed firms is of course directly relevant in the case of a public offering of shares. However, the same analysis can serve as a point of reference in other settings. An example of the latter occurs if the owners decide to sell the company, whether in whole or in part, by way of a private transaction.

More on Valuation of a High Growth Business.


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Hedge Fund Regulation: How to Avoid a Boondoggle

The central role of wildcat outfits in causing or aggravating blowups in the financial arena has led to widespread calls for hedge fund regulation. Amid the furor, policymakers have responded in their usual fashion by cooking up legislation intended to curb the excesses that led to the wipeouts.

However, past experience suggests that the heap of regulations will merely serve to throw a monkey wrench into the machinery of finance. In that case, the main impact of the legislation will be a mound of paperwork and bureaucracy which does little or nothing to prevent similar fiascos in the future.

If the stumpers are to be tackled head-on, a sweeping change is required in order to blunt the threat of hedge funds armed with weapons of mass carnage. The purpose of this article is to lay bare the real problems along with a cogent approach to eradicating the bogeys.

More on Hedge Fund Regulation: How to Avoid a Boondoggle.

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Guide to Creating an Investment Strategy

A Sound Program of Investment Strategy Matches Personal Circumstances against External Opportunities

A cogent approach to investment strategy is to align the personal traits of the investor with the external conditions in the marketplace. In the financial arena, as in most areas of life, one size does not fit all. Moreover, the best approach varies over time even in the case of a given individual. The proper choice at each stage will depend on a fluid array of characteristics such as financial resources, risk aversion, and retirement plans.

This article talks about the critical issues involved in thrashing out a tailored program of investment. A trenchant set of guidelines is presented, along with a selection of pointers to additional resources.

More on Guide to Creating an Investment Strategy.

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How to Beat the Investment Funds: Outshine Most Mutual Funds and Hedge Funds plus Earn a Bonus

If you’re like many investors, you must think that the title of this article is just a joke, and there’s no way for you to beat the full-time pros that run mutual funds and hedge funds. Or you might expect to read here that you should go back to school and earn a graduate degree in investment finance. Or maybe you ought to go out into the financial forum and spend a couple of decades learning the trade at the feet of renowned wizards of the marketplace.

If your thoughts ran along these lines, then you were mistaken. In reality, the title shown above is dead serious. Really it is.

There is actually a simple way to outshine the mass of mutual funds and hedge funds as well as private investors. The reason is that the objective is not daunting or even demanding.

Before we get down to brass tacks, though, we ought to spell out exactly what the goal is. Also, it’s helpful to get a good grasp of the nature of the competition. That way you’ll have a better appreciation for the what, why and how of the gambit for trumping the mass of players in the arena.

Getting a Fix on Mutual Funds

A raft of studies over the decades has shown that mutual funds as a group trail behind the stock market at large. Although the specific numbers may vary somewhat from one probe to another, a representative result is that the annual return from mutual funds is on average half percent lower than the benchmarks of the bourse.

One reason is that mutual funds have a habit of charging a maintenance fee based on the total value of the assets under management. In the past, the fee has ranged anywhere up to a couple of percent – or even higher – of the average value of the portfolio over the course of the year. In a hypothetical world, if the administrative load were waived, then the average fund might for the most part keep up with the market averages.

What can we infer from these observations? Based on the data, the pack of mutual funds as a whole adds no value to the task of picking stocks for investment. In spite of all their efforts to the contrary, professional managers as a group make moves that are equivalent to picking stocks at random.

Removing the Veil from Hedge Funds

In a raft of ways, the performance of hedge funds is even worse than that of mutual funds. According to impartial studies, the top tier of hedge funds ekes out a gross profit that is comparable to the average performance of mutual funds.

On the other hand, the net return to the investors is a lot less for a bunch of reasons. One big stumper lies in the practice of taking a big cut out of the profits.

The performance fee tends to range from 20 to 50 percent of the returns for any period in which the portfolio happens to turn in a profit. Due to the hefty bite, patrons end up with a significantly smaller piece of the pie.

On top of all this, the investors have to pay a fixed fee for administrative expenses regardless of performance. The usual charge comes out to a couple of percent each year of the total value of the assets under management.

Against this backdrop, the larger community of investors subscribes to a host of feckless practices. As an example, myriads of punters squander their money on mutual funds that levy a fixed fee of a couple of percent each year for holding onto their assets. The savers could easily secure better results through cost-effective pools that charge a pittance for their services.

A second curio lies in the fact that so many investors hanker after hedge funds when they could do much better on average with other vehicles including even mutual funds. Apparently the clients are unable or unwilling to ferret out the facts needed to make a cogent decision.

A third stunner involves the fact that the average investor earns even less than the average mutual fund. The crux of the problem springs from the custom of giving in to excess through alternating bouts of mania followed by panic.

During the extreme stages of the market cycle, the punters load up on stocks precisely when they ought to selling, then dump their holdings exactly when they should be buying. The upshot of the ditsy practice is to give up the profits and lock in the losses.

A fourth irony is that investors as a group spend so much time and effort trying to beat the market but end up lagging the benchmarks by a hefty margin. The results could be much better if the gamesters were to take a simpler tack then ignore the market completely. In that case, the demure investors could for the most part stay abreast of the market averages without wasting any time on trading or putting up with the headache of thrashing prices.

In fact, the players could beat the market over the course of a price cycle if they were to use a technique known as dollar cost averaging. To add icing on the cake, the scheme can be set up easily then left alone to run on autopilot.

At this juncture, however, we should note that the goal of beating the market averages is a topic best left to a separate article. Getting back on track, our purpose here is to trump the average pool in the marketplace, whether in the form of a mutual fund or a hedge fund.

Paying Yourself a Bonus for Beating Your Rivals

If you can keep up with the stock market at large, then you are outpacing the average pool managed by professional caretakers. That outcome will also ensure that you beat out the mass of individual investors by a comfortable margin..

In fact, you could pay yourself a management fee of nearly half a percent a year on the total value of your portfolio. In that case, you would of course trail behind the market benchmarks by a similar amount. Even so, you would still beat the bulk of the competition in the form of mutual funds, hedge funds, and lone investors.

So what’s the best way to achieve this exceptional feat? All you need to do is to take up the following procedure.

More on How to Beat the Investment Funds: Outshine Most Mutual Funds and Hedge Funds plus Earn a Bonus.

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