What We Learn From the Investor Movement Index: The Contrarian View

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For 10 years I was entrenched in helping people manage their own money at the biggest financial education company around.

When I finally realized that few people could actually be successful at it, I decided to adjust my career. I now manage the money for people at Iron Gate Global while still providing education on what we’re doing and why.

In the process of my market research, every month I keep my eye on an interesting index. This index provides clarity on what individual investors (trying to manage their own money) are buying and selling. It’s called the Investor Movement Index.

Below is a snapshot of this index. It’s very simple in how it works. When it goes higher people are buying, when it goes lower people are selling.

A couple notes to be aware of . . .

The market is trading near all-time highs and individual investors are still coming off the lows. This reiterates that individual investors are behind the professionals. In fact, the biggest bump should have been in January and February which was the best buying opportunity so far this year. (It was the time of year that we at IGGA have put the most money to work in the market.)

June 2016 Investor Movement Index

But that’s not the worst part of what I saw from this month’s index. The worst part were the actual stocks people were buying!

I wrote an article a while back called, The BIG Fallacy: “No one cares about your money more than you do.” In it I argue that I care more about people’s money than they do.

Case in point, among the stocks most purchased according to the release were Twitter (TWTR), which has no company direction what-so-ever, Valeant (VRX) which is a dumpster fire, Facebook (FB) which is one of the most expensive stocks trading at 73 times forward earnings and Gilead (GILD) which is actually one investment I actually understand. These investments just baffle me . . . these people are playing with fire.

I’m still in awe of the risks that people make with their own money. I saw it every day when I used to teach people how to manage money themselves.

We will continue our contrarian approach to investing while, unfortunately the behavior of people will always be something that very few can overcome and will continue to be the great stumbling block of success.


This Week’s Best of the Web

In each week’s edition of our newsletter we are picking articles we think you’ll enjoy and find deeply insightful.

The Brexit Vote – Jim Cramer has been on the right side of this from the beginning. He explains that the media overload is making a big deal out of nothing. We agree! In fact, we hope that the short term ridiculous fear presents opportunities to buy cheap assets.  Fear = opportunity.

9 Can’t-Miss Secrets Behind Warren Buffett’s Wealth. One of our favorite investors to learn from is Warren Buffett. These are 9 things that Mr. Buffett does constantly. Number 4 may be the hardest to do but one of the most important.

Best Rewards Credit Cards for Your Wallet – While we don’t agree with credit card debt, we do like using credit cards to receive free rewards. Kiplinger’s does some outstanding work in this article detailing the best rewards you can receive from using credit cards.

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Categories: Markets.