For several generations, many Americans have been misinformed about how to successfully invest in common stocks.  It is our purpose to teach a new generation of investors how to wisely engage the stock market for success.

As the Industrial Age took hold in America wealth was created and spread by entrepreneurs, workers, and families.  Knowledge and participation in the common stock of corporations gradually grew. The 1920’s ushered in an era of common stock ownership, which was all but extinguished during the Great Depression beginning in 1929.

After the Second World War, the innovation and industrial expansion, which had been used to win the war, was redirected by entrepreneurial enterprise to meet enormous post-war consumer demand.  As businesses grew to meet these demands, so too did the wealth of corporations, small businesses, workers, and families.

A new generation of investors again saw the benefits of sharing the opportunity of success and distributing the risk of failure through the ownership in the common stock of corporations.

The foundation of the modern financial service industry was born in 1948.  Mr. Charles Merrill began using advertising to promote Wall Street and the investment opportunities there.[1] The idea of the “Mutual Fund” first appeared in 1924, and grew very rapidly at this time.  It gave people a tool by which they could invest in common stocks without having to do the work required to understand which stocks to buy.  The rich, post-war, industrial boom years brought a rising tide of success to broad sections of America and lifted the fortunes of many who invested in mutual funds.

This rising tide of success brought explosive growth to the financial service industry.  With this success has come a vast army of well-meaning financial salespeople with the primary purpose of capturing “money under management” for financial service firms.  These salespeople have promoted three strategies that we believe have proven to be problematic to the creation and preservation of individual wealth, once the broad, rising tide of productivity gains that were achieved after World War II reached a plateau.  These three strategies are:

1. “Leave your money with us”.  Individuals are encouraged to transfer the responsibility of managing their investment money to someone else.
2. “Buy and Hold,” which equates to leaving your money invested in the market at all times, regardless of the state of the national economy or business cycles.
   “Buy and Hold” also reinforces financial service industry strategy #1:  “Leave your money with us.”
3. “Diversification.”   In order to sell more investment products, diversification has often been incorrectly represented  to mean spreading risk among different industry groups of stock mutual funds (growth funds, income funds, large cap funds…) instead of diversification among distinct asset classes (stocks, bonds, and real estate).

While these three strategies have been counter-productive enough, one of the worst burdens of this burgeoning financial service industry has been the unchallenged acceptance of mutual fund success being measured by relative performance!

In basic terms, the relative performance we are talking about here means – measuring and stating results against a fluctuating standard which directs attention away from actual gains and losses of the capital invested.

Individual investors who, in their everyday lives, will correctly fight to make sure that they are getting the absolute best price for food, clothing, and housing, unwittingly allow themselves to be charged significant annual fees regardless of whether their money has grown or lost value in a mutual fund.

The financial service industry has created for itself an extremely powerful fee-based compensation business.  This business is dependent on the quantity of funds under their management – NOT on the performance of those funds.  This is why your broker or mutual fund will fight with very persuasive arguments to convince you to keep your money under their management.

These three strategies and the acceptance of relative performance as a measure of success established a foundation of false thinking about investing for the past two generations.   This set the stage for disaster when the stock market corrected sharply twice in the past decade – 2000-2003 and 2008-2009.  For twelve years now the market has remained in a range between 1996 and 2000 values.   This stock market plateau, punctuated twice with intense selling, combined with the effects of the housing bubble on those who purchased homes or over-spent during the housing boom years of the early to mid-2000’s, has left the average American completely unprepared for generating passive income during low earning years of advanced age.

Our objective at Stock Market Companion is to introduce and teach a system of sound investing that applies to individual common-stock investing, and teach about current global and business economics and entrepreneurialism that reveals immediate and future investment opportunities.

Fortunately, the entrepreneurial spirit is bringing forth new businesses and real business growth opportunities to meet demand across many industries.

Individual common stock investors can find exciting opportunities emerging around them and, with the internet, around the world in growing businesses with publicly traded stock.