The Key Tool You Need to Invest in Today’s Market

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Check out this helpful post from our friends at Investing Answers: 

I’ve never worked a day on Wall Street. I’ve never worked at Goldman Sachs (NYSE: GS) or a hedge fund, either. I’m not what you call an insider by any means.

But that hasn’t stopped me from being a successful investor. The good news is that it doesn’t have to stop you, either.

If you’re like most investors, you are dumbfounded by the complexity that seems intrinsic to the stock market today. Heck, even the pros on Wall Street didn’t know what was actually inside those fancy mortgage-backed securities they were buying until after the housing collapse. If they don’t know what they’re doing, how can you and millions of other investors stand a chance?

Because you have one powerful tool at your disposal — common sense — and you’d be amazed at how far it can get you in this market.

I earned an engineering degree at Columbia University and a master’s at the University of Texas. I earned a Series 3 certification in commodities and futures. I’ve created investment education courses used by the major investment houses. I’ve been published in economics and statistics. I’ve provided financial analysis in commercial litigation. (My legal team once won a $100 million settlement for a telecom patent holder.)

In other words, I have the background and experience to hold my own against some of the big boys on Wall Street.

And don’t get me wrong, that experience is invaluable when I’m researching the ins and outs of a stock. But I’ve found my best ideas are usually driven by the simplest forces. That’s great news for everyday investors.

Let me explain exactly what I mean.

A year ago, I was looking for a pick for my monthly issue of Stock of the Month. But I didn’t start my search with some extensive screen or by researching an up-and-coming tech company that might displace Apple (Nasdaq: AAPL). I did something much more simple. I used common sense.

We were still mired in a soft economy, so I wanted to find a segment that would do well as consumers cut back on spending. I found that spot in beauty supplies. People still want to feel good about themselves, but in tough times not as many folks will go to a fancy salon.

That’s common sense.

So I bought Sally Beauty Holdings (NYSE: SBH) – a chain of beauty supply stores headquartered here in Texas. Its store locations are heavily trafficked by price-conscious “do-it-yourself” retail customers.

I just sold my position a few weeks ago… for a 58% profit.

Don’t get me wrong; this isn’t about just picking a stock and throwing money at it based on common sense. There’s a lot of research that goes behind the stocks I buy, and you should do the same.

But if you think it’s only Wall Street that’s able to make money from the market these days, I want you to know that there are still profits to be had — and you don’t have to be a Ph.D. or Wall Street insider to earn a nice return.

(By the way, I think one of the most common-sense areas to invest right now is in companies that help ease “paperwork.” In the wake of the health care reform bill, there are going to be some pretty nasty tax issues to deal with — especially for small businesses. Those companies that can ease this burden for businesses and individuals should do pretty well by investors.)

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