How This Amateur Investor Turned $20,000 Into $2 Million In The Thick Of The Recession
Read more: http://money.usnews.com/money/personal-finance/mutual-funds/articles/2011/11/01/how-one-amateur-investor-spots-stocks-before-wall-street#ixzz2FYWza2i7
That amount grew to more than $2 million over the next three years, even as many people's portfolios plummeted.
The 37-year-old amateur investor attributes this success to his knack for identifying trends and spotting opportunities before Wall Street.
Camillo gave U.S. News a peek at his book, Laughing at Wall Street: How I Beat the Pros at Investing (by Reading Tabloids, Shopping at the Mall, and Connecting on Facebook) and How You Can Too, in which he reveals some of his strategies.
Here's an excerpt from an interview with Camillo.
Do you think amateur investors like you have any advantages over professionals?
Wall Street's core demographic tends to be middle-age, affluent males that work and reside in major metropolitan areas. So they tend to be biased, and tend to be slower to pick up on trends that involve female, youth, low-income, or rural trends.
We have access to a more diversified set of friends and colleagues throughout the country that know more things than those on Wall Street. If you look at most of my investment successes, they center around females, or items that revolve around children: Guitar Hero, the Wii. Even the Target Missoni line [of clothing and housewares], which I found out about through my wife, and through females that I work with.
Could you tell us about one of your recent successes?
My wife first brought information to me a few months back that Target was going to be doing the Missoni line. So I looked into it, and on the day of the Missoni release, I was actually at Target in the line of 150 people, and within two hours, every piece was sold out. Within minutes, I was able to verify that it appeared every Target store in the country had sold out of Missoni.
At the same time, Target's site had come down. So to me, that was game-changing information that I had in my hands that Wall Street had not picked up on yet. So I initiated an investment within minutes, and in really 48 hours, I had almost tripled my money.
Any thoughts on the people who bought Missoni at Target, then sold it on eBay for a profit?
I think the irony, what popped in my head is you know these are people that had information, and they probably made some decent money selling that merchandise on eBay. But I can assure you they made nowhere near as much money as I did in a couple days just simply trading on that event.
So if all these people would have had the tools, and the insight to understand how much money they could make with a lot less effort, you know not having to sell hundreds of pieces of merchandise on eBay.
Clearly, you've had some success stories. But are there any cases where things didn't play out as you expected?
Yes, I still have difficulty today trading on my own information because it's hard to believe that an ordinary person can see something in their regular life that all of Wall Street hasn't picked up on yet. So some of my biggest regrets in the past have been not aggressively following my own instinct.
In fact, one instance where I did not follow my instinct recently was the movie Avatar. I actually walked out of that movie, and said to my friends, "You know, this film is going to change the future of film entertainment for 3D films essentially." That had a monumental impact on IMAX theaters and on IMAX's stock price.
Wall Street didn't pick up on that for quite some time, and it was difficult for me to believe at the time that something that seemed so obvious would not be obvious to Wall Street, similar to the Michelle Obama J. Crew story. That was something that was right in front of my face and it had completely flown by me.
Your book mentions that you spend lots of time on due diligence before investing. Could you tell us more about that process?
The due diligence process that I discuss in my book is unique in that it doesn't involve any fundamental analysis or technical analysis. So someone with zero financial literacy can easily follow my due diligence process. The due diligence process is mostly about one figuring out, "is the information that you found going to have a real impact on a publicly traded company?"
So if the company is small, there's a higher degree of impact that the information you found might impact that company's stock. If the company is large, then the information has to be really big and monumental for it to impact a publicly traded company's stock. That's the first phase of the due diligence process.
The second phase is determining if Wall Street and the investing public is already aware of the information that you've uncovered. And that is simply sifting through many, many articles, any publicly released information about that company. If you determine that they do not yet see that information as fact, then you move on to a third step which is actually placing your trades.
Readers may be concerned about amateur stock investors losing money. Any thoughts on the risks involved?
People are generally risk-adverse with their money. I think all humans have a hard-wired aversion to losing money, and there's a large psychological barrier to overcome with risking your money on a stock trade or a leverage options trade. So one of the things that I teach prior to even thinking about finding the next big thing is learning how to compartmentalize your finances.
Most of us have a spending account. Many of us have a savings account, which could include a retirement account. And that's money that we count on to retire with, and to get rich slowly over the course of our life. But what few of us have is what I call a big money account.
So I encourage all people to view every dollar in their life as a potential hundred dollars for its full future potential investment value. And when you start to look at everything in your life, every dollar bill as a hundred dollars, it uncovers all types of money that all of a sudden you might be willing to put into your big money account. For example, you might really appreciate getting all the sleep you can on the weekends, so you might hire someone to mow your lawn.
However, if you view that $20 as a potential $2,000 for its full investment potential, that might persuade you to go out and mow your own lawn, to take that $20 and put it into your big money account. Now you have an account that you're willing to take risks with, that you're willing to make leverage investments with.
This story was originally published by U.S. News & World Report.
Read more: http://money.usnews.com/money/personal-finance/mutual-funds/articles/2011/11/01/how-one-amateur-investor-spots-stocks-before-wall-street#ixzz2FYWnSlqU
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