Day traders and retail investors are not very good at making money. They are, however, very good at losing it.

It’s a fact.

A simple Google search of “what percentage of traders lose money” reveals hundreds of results, 22 pages of them…

Citing stats showing a whopping 80-95% of day traders end up in the red.

And for retail “investors”, or DIY, self-directed investors – those who don’t actively trade in and out of short-term positions – outcomes are not much better. 

You see, data from the Financial Times reveals that over 70% of DIY investors end up losing, even if they hold longer-term positions. 

In just a moment, we’ll explain why even this group, the buy-and hold self-directed investor, often find themselves losing money too.

First…

The Capital Donors

Most day traders and self-directed investors are essentially fueling the profits of the small, yet effective minority.

One Google search result of “percentage of retail investors that lose money” says “75% of Retail Investors Are Essentially Capital Donors.” 

Meaning the vast majority of DIY investors are on the wrong side of the market and are “donating” their money to a small percentage of winners.

As you can imagine, the small percentage of winners taking these “donations” include institutional and professional investors, as well as some well-prepared day traders and self-directed investors.

The question is why do these two groups, day traders and self-directed investors, have such a poor win rate? And is there a way that both groups could improve their dismal results?

Let’s start with the reasons most day traders and DIY investors lose money. And it’s rather simple… poor preparation, emotional trading, a lack of market understanding and no real strategy.

Essentially, most day traders are gamblers, while many DIY investors, even those that have a buy-and-hold strategy, don’t often utilize proper research and market data tools. 

Buy and hold… buy and beware

MarketWatch says, “Going all the way back to 1926, it turns out that a stunning 59% — roughly three out of five — of all the stocks ever quoted on the U.S. stock market have made their investors poorer. 

“Yes, the stock market overall has gone up phenomenally since then. But all of the gains have come from the other 40%, or two out of five. And even among those “winners” most of the gains have come from a very few.”

So, even a buy-and-hold strategy, one that lacks proper research and stock selection, often leads self-directed investors down a losing path, a historically losing path where 60% of all stocks have left them poorer…

While professionals have gotten richer.

Research, research and more research

What truly sets the winners apart from the losing majority of day traders and self-directed investors is research, and the proper application of actionable market data.

See, while professional and institutional investors may take days, weeks, and sometimes months or longer before making an investment in a single company (while utilizing tools like SentimenTrader for both long, medium and short term market analysis and actionable short-term trade data), day traders and DIY investors generally do not.

Instead, they get a tip, or see a trend and hop on in… hoping for the best. 

But, as we’ve shown, hoping for the best is a losing strategy. One built on emotion rather than logic.

So, is it possible for day traders and self-directed investors, even buy-and-hold investors to better their chances at winning in the markets? 

Well, we think so.

And again, it comes down to research, research and more research. 

Or, more simply, they must employ the same strategies that the winners employ.

You see, while it is “popular” (and emotional) to villainize institutions and professional traders as sharks and scoundrels, perhaps DIY investors and traders should drop the emotions and do what the pros do…

Utilize actionable research and market data tools like SentimenTrader.

If you can’t beat them, join them.

On March 17 of 2020, Analysis Mason published a report on the Software as a Service market, or SaaS. At the time, the industry was just beginning to grab mainstream attention, and publicly traded SaaS companies like Salesforce (CRM) and Adobe (ADBE) had tremendous years, returning 36.8% and 51.64% respectively; both far exceeding the 18.4% returns of the S&P 500.

In its 2020 report, Analysis Mason said the expected SaaS-related revenue would grow at a 29.5% compound annual growth rate (CAGR) through its 5-year forecast period, which coincidentally ended in 2023. 

However, it’s now 2024.

A new report from SkyQuest Technology Group shows growth in the SaaS market, moving forward (from 2024 to 2031), is now expected at half the previous estimated rate… or a CAGR of just 13.7%.

Clearly, while still robust, this would represent a precipitous drop in growth forecasts, which can now be evidenced in some SaaS stocks.

Take for example those darlings of 2020, Salesforce and Adobe. As of this writing, CRM is down nearly 3% YTD, with ADBE down over 5% YTD. This, while the major indexes have reached new all-time highs.

But it’s not all bad news for subscription-based companies.

In fact, for some companies, their growth is outpacing the latest SkyQuest estimates. 

Defying Headwinds, Fueling Recurring Growth

CIO.com says, “Organizations with subscription-based business models have not only survived the recent global economic challenges but have also outperformed their traditional, product-based counterparts…

“…burgeoned 3.4 times faster than their counterparts in the S&P 500, underscoring a compound annual growth rate of 16.5% against the latter’s 4.8%.”

So, why are some companies succeeding in the subscription-based business now, even as the fanfare of 2020 has long passed?

Well, as CIO continues, there’s a “transformative shift towards “total monetization” strategies, where businesses increasing adopt innovative, customer-centric models to ensure sustainable growth.”

So, outpacing growth in the SaaS market is there… you just have to find it.

Nicolas Lin, CEO of Aether Holdings said of the subscription-based business model, “The flexibility of the model allows businesses like Aether to quickly pinpoint opportunities and pivot away from potential revenue holes. 

“We’ve already acquired one subscription-based company in the financial research space, Sundial Capital, the operator of SentimenTrader, and we’re actively looking to acquire additional assets in this exciting space.

“Clearly, the subscription model not only gives the consumer more control over choice but gives businesses the opportunity to quickly creating more customized products for more efficient revenue growth.”

Read more of the CIO.com article HERE

Or read more about Aether Holdings, HERE

Subscriptio n economy defies economic headwinds, fuels recurring growth | CIO

Rejoice investors, there’s no bloodbath coming (or is there?).

The first half of 2024 has been nothing short of spectacular. The S&P 500 hand-fed investors total returns of over 15%, with the tech heavy NASDAQ doling out nearly 18%. 

That’s 15-18% in just a six month span…

All while wars raged across the globe, inflation remains “sticky” at home and abroad, the US government seems to continue spending more money than it can print…

And the FED holds interest rates steady at two-decade highs, waiting/pushing for employment numbers to crack. 

Tough times, yes, but very good returns, nonetheless. 

Now, while 15% returns over six months may not seem so great for a single hot stock, and it’s not, it is, however, spectacular for an index.

Take the S&P 500’s first half total returns this year, for example. They were over three times greater than the historical average returns of 4.72% since 1953. 

And that’s plenty of reason to rejoice, right? 

Hmm.

Of course, much of 2024’s first half gains can be attributed to just a handful of heavyweight single stocks; the “magnificent seven.”

Apple (AAPL), Microsoft (MSFT), Alphabet (GOOG), Amazon (AMZN), Nvidia (NVDA), Meta Platforms (META) and Tesla (TSLA).

But…

Like all good things, this bull run must come to an end, and it may come to an end with a fast and violent correction.

Now, we’ve already seen the cracks start to form in the wings of at least one highflier, Nvidia. The stock closed out the first half with near 150% returns… yet began to slip by mid-June; having quickly and violently shed over 13% from its highs.

Yahoo! Finance said, “Nvidia suffers biggest loss in world history after $646 billion bloodbath: ‘This is a concern’”

Investor’s Business Daily went as far as to say, “Will Nvidia Stock Crash Like Cisco In 2000?”

MarketWatch said, “The S&P 500 and its biggest stocks are showing cracks and fissures”

Now, we don’t know if small cracks and fissures will turn into Grand Canyons… 

But there is reason for great concern.

See, in the S&P 500 ETF Trust (SPY) just seven companies make up 32.26% of its holdings… yes, the magnificent seven.

Should the cracks that are already appearing turn into something more serious, we could be on the verge of correction. In fact, a correction in just these seven stocks, at the same time, could crush the indexes… and all the other stocks in them.

Now, how do we know with any degree of certainty that a correction, or perhaps a bear market, is on the horizon?

Well, for this, we need to fully understand market indicators and market sentiment.

Yield curves, credit spreads, sector rotation, valuations, technical patterns and transitions…

Geopolitics, economics…

Interest rates…

The list goes on and on.

However, there has been at least one indicator that’s been historically quite accurate at predicting bear markets… and ironically, it’s what Wall Street seems to be wanting.

Rate cuts.

Have a look at this chart.

This is a 20 year chart of the SPY with the Fed Funds Rate overlay. And here’s the irony…

As you can see, each time the Fed began a rate cut cycle (as Wall Street cheered), the SPY tumbled.

And…

With the potential for rate cuts coming later this year, investors should be preparing themselves in the event of a bear market, and perhaps a recession.

See, each time a major rate cut cycle has begun, recession has followed. The purpose of a rate cut, after all, is to stimulate a weakening economy.

Now, the Fed knows history. It knows what has happened in the past and is desperately trying to buck the trend. It’s why we keep hearing the Fed is aiming for a “soft landing.” 

Meaning it can manage interest rates effectively, without triggering recession.

But can the Fed achieve its goal this time?

We simply don’t know yet. However, you should be prepared. Prepared for a correction, a bear market or even a continuation of the bull market. Be prepared for everything.

There is no reason to stay in the dark.

So, what’s the best way to prepare for “everything”, you ask?

SentimenTrader. 

You see, with over 3,000 proprietary indicators and charts, SentimenTrader has been a preferred market and research tool for Wall Street professionals for over 20 years.

Those twenty years span that entire SPY/Fed Funds rate chart shown above. And throughout these 20 years, SentimenTrader has been atop of, and often ahead of every move.

It’s why Wall Street trusts it. And it’s why you should too.

See, even though SentimenTrader is preferred by Wall Street, it isn’t for Wall Street professionals alone. 

It’s also for self-directed investors and traders.

If you’re looking for an edge, an edge already enjoyed by Wall Street, you too should subscribe to SentimenTrader…

And subscribe today.