Many investors aim to outperform the market. This is also known as beating the market or surpassing the market average. It occurs when an investment portfolio performs better than the 7% to 10% yearly average that the stock market has done over time, providing a higher return than the global market index.
Analysts use this term to recommend stocks they think you should invest in. To give you a better idea, experts from Alpha Wealth Funds share key strategies to outperform the market:
These are privately-owned companies that pool their investor’s money. They claim to achieve above-average returns by using derivatives. The value of these investments lie on an underlying asset, like a bond or stock, and use leverage to beat the market. Traders often buy stock at a low price, wait until its value rises, sell it for a much higher price, and pocket the rest.
This type of trader claims high returns by only investing in stocks that outperform stocks. This is also one of Warren Buffett’s strategies. He buys controlling shares of companies with a clear competitive advantage, as well as those of leaders he respects. Buffett is known to go for stocks that most traders ignore, often investing in lacklustre industries like insurance.
Actively managed mutual funds
Fund managers work on different strategies to gain a higher return on investment. They have a team of researchers, data-crunchers, and analysts that help them. They have an active role in the management of funds and put a premium on their expertise.
An asset’s reaction to the different phases of the business cycle can vary tremendously. If an economy heads into recession, holdings like gold and bonds are bound to rise in value. Timing the market is a tricky business that even pro traders have a hard time doing. That said, the safest way to outperform the market over time is to have a diversified portfolio.