Basic Techniques  |  APR 1997

The Essence of Market Profits by Victor Sperandeo

The Essence of Market Profits by Victor Sperandeo The key to making money in the markets is having the major trends at your back. This well-known money manager points to the importance of looking at the big picture. Popular beliefs about investment profits reflect a number of divergent points of view. These beliefs range from microfundamental analysis — otherwise known as “stock picking” — and technical analysis, both of which rely on the skill of the money manager, all the way to the random walk theory, which states that skill plays no part whatsoever in achieving attractive returns. The importance of analytical frameworks notwithstanding, such methods neither create profits nor answer the question of what, in fact, does. The answer to this, the most fundamental investment question of all, is actually rather simple: Long-term trends are what create profits and losses in a given market. Fundamental macroeconomic forces are responsible for creating the trend itself, but once in force, the overriding investment trend will continue until a new set of fundamentals are strong enough to change it.

by Victor Sperandeo