So many people are intimidated by investing because they feel like they don’t know enough to be effective. I get around the difficulty of individual stock picking by investing mainly in index funds and ETFs, as well as choosing dividend aristocrats when I do go for individual equities.
Chris Camillo, the author of Laughing at Wall Street, has a different approach. He believes that every day, people can invest in what they know and make potentially huge profits. “I think it’s important for ordinary people, like myself, who don’t work on Wall Street, to leverage a skill set to have an advantage over Wall Street,” he says.
What Do You Know that Wall Street Doesn’t?
Many people outside of Wall Street have the ability to observe game changers that could change things up for companies. Camillo says that’s when you should invest in the company, then wait for Wall Street to come in later and drive the price up.
“From 2006 to 2010, I was able to turn $20k into $2M,” Camillo says. “I did this by leveraging things I saw, using social information arbitrage. It’s about learning to see the world differently and learning how to identify investment opportunities over the course of your everyday life.”
Camillo points out that Wall Street is often behind the curve when it comes to identifying consumer trends. You, however, probably notice these trends while shopping, interacting on social media, and talking with your friends. If you can identify which trends are likely to be game-changers for companies, you can invest in the company before Wall Street takes the hint.
Take Cheeseburgers, For Example
In order to illustrate his point, Camillo points to the release of Wendy’s pretzel bacon cheeseburger in summer 2013. “Any ordinary person could see that this was a huge deal, just by going out to eat and paying attention to social media,” he says. “If you invested in Wendy’s when you noticed this trend, you could have got the stock a little cheaper. When it turned out that this was the best performing menu item in 20 years, Wall Street finally paid attention and Wendy’s stock doubled.”
Wall Street analysts were weeks behind the trend, waiting for earnings reports and statements from Wendy’s. So if you can invest before these types of reports are released, you could do well as an investor, according to Camillo. “Ordinary people see these trends in real time, and if you can invest before the trends are on the radars of professional investors, you can do very well.”
Camillo also points to LeapFrog as an example. “Mommy bloggers were writing about the LeapPad in August 2011,” he says. “If you had read about it and, instead of saying, ‘This could be good for my kid’ and going on with your day, and instead asked if it was an investment opportunity, you could have bought stock before analysts took note in September and October, and before it was the best selling Christmas toy of 2011. You would have cashed in.”
It’s an interesting approach to investing that Camillo insists only works for a small portion of your portfolio. “It can be a good way to make money in the short-term, but most of your money should be in long-term investments, like mutual funds. This is just about making a splash when you see the chance.”
What do you think? Does it make sense to trade on your consumer intuition?
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