Much time and effort goes into searching for stock market inefficiencies that can be exploited for profit. Former string theorists work together developing algorithms to comb through historical data looking for persistent patterns. The problem is that once we find a strategy to exploit an anomaly and it becomes widely-known, it stops working. There is one pattern that I bank on, though.
There are those who try to make money from momentum effects and others who believe in “sell in May and go away” until November because stocks have performed poorly in summer. I don’t trust these approaches because they seem like just the sort of thing that would stop working if too many people used them.
If everyone believed in “sell in May and go away” then we could anticipate a big sell-off in May and a rise in November. So the right thing to do would be to sell before May and buy before November. But if too many people did this, the right strategy would change again.
There is one stock market pattern that I bank on, and that is the tendency for people to be conservative. To entice investors, risky investments have to offer significantly higher expected returns than safe investments. This makes sense to a degree, but I think investors are generally too conservative. This makes riskier investments look better to me.
So, I am content to invest in the stock market and hope to get higher returns than I could get with safer investments. I have my limits, though. I don’t use leverage, and I stick to indexes for broad diversification. And I avoid getting drawn into attempts to beat the market with interesting strategies.