How To Outperform The Stock Markets And Make Ladies Love You

A Sexy ManThe stock markets are tanking right now thanks to Europe and you’re loving it!  Why?  Because you and I are sitting pretty on our 12% gains since we took profits around March 15, 2012 when the S&P 500 was hovering at 1,405.  We are disciplined, and realized that a 6X return over the 10-year government bond yield of 2% in just two and a half months was outsized and unsustainable.

Furthermore, we know that plowing our proceeds in a stable value fund that yields just 2.5% guarantees ourselves a total return of roughly 13.5%.  Anything above a 10% return in this shaky environment is a glorious return because everything is relative.

But, what if you aren’t satisfied with just a 13.5% in your mothership fund?  What if you don’t want to take the rest of the year off and go to Aruba with all your new lady friends and still crush 95% of the competition when the results are tallied on December 31?  Not a problem, because who wants to kick back and live the good life?  Greed is an elixir!


If you want to outperform, all you’ve got to do is jump right back in the markets.  The S&P 500 at 1,350 is down about 4% since you decided to take profits.  As a result, all you’ve got to do is invest all of our proceeds in the S&P 500 by buying the cheap and easy ETF fund, SPY.  Now that you’re fully invested in the S&P 500 again, no matter what the market does through year-end, we will outperform by 4%.

If the S&P 500 claws its way back to 1,405, your total return will be 16%.  And if the S&P 500 continues to correct down to 1,300, you’re down to +8% but still better than the index at only +4%.  Whatever happens, you’ve locked in your outperformance for the year, and if you ran a mutual fund, you’ll immediately rocket to the top of every fund analysis review from Morningstar to Fortune Magazine.  With the accolades comes tremendous fund flows, and therefore more fees, and bigger paychecks.

With your picture in Morningstar winning Fund Manager of The Year, you will start receiving tons of e-mails and phone calls from seemingly innocent women (and men) who want to jump your pants.  You will be shallow and respond to only the attractive ones who will immediately accept your invite to Aruba.  With the extra money you have at your disposal, there is nothing too expensive for you and your friends to indulge in.  Life is good!


Now that you’ve got the capital, bankers come flocking to you for more sexy investment products that aren’t available to the general product.  Structured Notes they pitch, with a minimum total investment of $100,000.  “$100,000?  Psssha. How about 1 meeeleon dollars as I’m big time now!“, you retort.

As you wish sir!” responds the banker, as he gleefully calculates his $20,000 commission while you check the time on your IWC Big Pilot watch.  You sadistically wish the markets IMPLODE before the IPO date.  You put a million bucks into the S&P500 Buffer PLUS structure note because it provides you 10% downside protection and 2X upside gains up to 22% over a 2-year time period.  Holy crap.  Not only are you up 12% YTD for 2012, you get to put all your proceeds into such a product which gives you double the upside, and keeps you up even if the markets go down 12%? Thank you heavens!

You start feeling guilty because the game seems rigged.  Why do you get to invest in these products while other people can’t and have to suffer market losses?  Then you look back at your IWC and remind yourself of all the hours you spent reading books, going to school, studying the markets, and putting your balls on the line.  “Screw the guilt!  This is America, damn it!”, you shout as you transfer funds.


Well shoot, we’ve already talked about this!  There is a high correlation with how attractive your girlfriends are, and how ostentatiously wealthy you are.

When you’re outperforming, by definition you are doing better than your peers.  With more money, you aren’t counting pennies when you buy that $10 Cosmopolitan for the lady along with the $400 dinner.  Afterward, you won’t be worried about taking her home to a one bedroom rental in the ghetto because you’ve got a swank pad at the St. Regis!

Women like to say that money doesn’t matter, but that’s probably because they aren’t with a man with money.  If you have man #1 who is: handsome, kind, funny, fit, and smart vs. man #2 who is: handsome, kind, funny, fit, smart and rich, man #1 will get shut out!

If you are a broke ass foolio who hasn’t been saving, hasn’t been studying, and hasn’t been investing, you will not have a sexy girlfriend.  Furthermore, if for some odd reason a hot woman is with you, you should bet your bottom dollar that she won’t stay with you for very long.

When the juice runs low, they’ll know it’s time to go!


Come the New Year, you’re back to being a nobody, because your clients and the markets only care about what you’ve done for them lately.  You only care about what you’ve done lately as well.  No matter, you’re a grizzly veteran now and have Financial Samurai on your side to kick your nuts or squeeze your nipples, reminding you that you can never lose if you lock in a gain.

Investing takes discipline.  You understand your risk-adjusted metrics because you really aren’t investing for yourself.  You’re investing for your family, or your future family that you care so deeply about.  The more you have, the more you have to lose.  It might take 10 years for you to build your investment nut, and just one year to lose half of it.  You don’t want that.  You are not a donkey, but a savvy investor with an even-keeled mind.

Sometimes you win, sometimes you lose.  But, for as long as you live, you know a new year will come again.

Recommended Action For Increasing Your Wealth

Manage Your Finances In One Place: Get a handle on your finances by signing up with Personal Capital. They are a free online platform which aggregates all your financial accounts in one place so you can see where you can optimize. Before Personal Capital, I had to log into eight different systems to track 28 difference accounts (brokerage, multiple banks, 401K, etc) to manage my finances.

Now I can just log into Personal Capital to see how my stock accounts are doing, how my net worth is progressing and when my CDs are expiring. I can also see how much I’m spending every month to make sure I’m within budget. If you are interested, they can even provide tailored financial advice for much cheaper than traditional wealth managers. Personal Capital is the best free online tool I’ve found to manage your money. It only takes a minute to sign up.

Invest In Ideas Not Stocks: Motif Investing is a terrific company based right here in the San Francisco Bay Area. They’ve raised over $60 million dollars from smart investors such as JP Morgan and Goldman Sachs because they are innovating the investment landscape with their “motifs.” A motif is a basket of 30 stocks you can invest in, which are aimed to profit from a specific idea or underlying theme. Let’s say you think new housing construction is going to quicken in the US next year. You could buy a housing motif which might contains Lennar, KBH, Home Depot, Bed, Bath, and Beyond, Zillow, and more in various weightings.

You can buy a basket of 30 stocks for only $9.95, instead of buying them individually for $7.95 through a typical broker. You can build your own motif, buy one of the motifs created by Motif Investing, or buy a motif by a fellow Motif Investor with a great track record. You can even buy retirement motifs, much like target date funds, except you don’t have to pay the 1% management fee. You get up to $150 free when you start trading with Motif Investing. Given my focus on buying winning long-term ideas and ignoring the short-term volatility, I really like Motif Investing’s value proposition for retail investors.

Updated on 12/1/2014. The bull market is alive and well. Don’t forget to rebalance and manage your risk exposure. Everybody feels like a genius during good times.

Photo: SF Cross dresser in red, 2014. FS.

About the Author: Sam began investing his own money ever since he first opened a Charles Schwab brokerage account online in 1995. Sam loved investing so much that he decided to make a career out of investing by spending the next 13 years after college on Wall Street. During this time, Sam received his MBA from UC Berkeley with a focus on finance and real estate. He also became Series 7 and Series 63 registered. In 2012, Sam was able to retire at the age of 35 largely due to his investments that now generate over six figures a year in passive income. Sam now spends his time playing tennis, spending time with family, and writing online to help others achieve financial freedom.

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship. Sam focuses on helping readers build more income in real estate, investing, entrepreneurship, and alternative investments in order to achieve financial independence sooner, rather than later.

You can sign up to receive his articles via email or by RSS. Sam also sends out a private quarterly newsletter with information on where he's investing his money and more sensitive information.

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  1. Brandy says

    This seems very complicated to me…can I give you some money and you just make me make 12%? Please???

  2. Mike says

    I’ll wait until my stocks are a long term gain until I sell. Only a couple more months leftuntil that happens. On a side note, I wish I held onto a couple of stocks before selling them. I bought LVS when it was $5 and sold it at $10. Dumb move on my part since it’s now $50. I also traded Apple until I sold it all at $200, dumb move too.

  3. Kathryn C says

    Studies show big q4 rallies in election years. If Romney is elected, oh boy, even bigger rally. But Obama seems to be doing a fantastic job courting gen Y, so, that’s that.

    I’m long term, I have a pot of money invested and I don’t fiddle with it too much. After working in asset managed for like 100 years, it’s impossible to time the market. I’ve witnessed too many money managers do that, and fail. But you seem pretty good at it.

    On your point “Women like to say that money doesn’t matter, but that’s probably because they aren’t with a man with money.” I could go on and on about this one…..
    spot on.

    • says

      I’m sure my time will come and I will underperform and fail miserable. But alas, I will keep trying! It’s not so much timing the markets, but just taking profits when I have reached my goals, and when of course I think the markets are ridiculous. The blog holds me accountable, so there is NOWHERE to hide!

      Can’t wait for your post on my last point.

      • Kathryn C says

        Oh boy. That would be a fun one: “Women like to say that money doesn’t matter, probably because they aren’t with a man with money.”
        So little time, so many people to piss off.
        I’m on it.

    • says

      I prefer not to try and time the market beyond letting my cash contributions pile up while the market rises, and buying when it crashes. I’m a long term investor and this simple technique has served me quite well over the years..

  4. says

    I sir did not cash out and as such have seen most of my gains dwindled LOL. Do you have accounts that you don’t touch or is everything in your equities world active?

    • says

      The stuff I cannot touch are my company stock and private investments. I just can’t help but rebalance when I think things are out of whack and targets have been reached. For the past 12 years now, crap has traded relatively sideways. Gotta trade the markets otherwise things just revert back to 0.

      I DO hope things get better over the next 5-10 years, which is why I’m going to dump a chunk of change in the 6 year DJIA Structured Note.

  5. Eric says

    I read your post that describes the structured notes and I’m still skeptical. These products are designed by investment bankers and they sound very similar to casino games where the upside potential sounds enticing but the odds are really stacked in the banks favor. Losing upside potential could be costly. And what about the dividends, how does that figure in?

  6. says

    Well you know where I am in life right now, so my biggest investment right now is going right into myself. I think it will do better than the markets, especially in these times. ;)

    When I have some more spare cash flow, it will depend on what opportunities are available. I’m a bit of a gold bug, so I like the idea of picking up some more PMs, and aside from that, yeah, I might be forced to keep some short-term cash in the best GICs I can find. Just blows that the best rate doesn’t even match official inflation stats. For now though, I’m not even worried about this because I’m focusing on building cashflow, first.

    I don’t see the high-interest rate exit strategy coming into play for the US; in fact, I see the situation as more like balancing a sphere on top of a point, and I don’t think it’s going to end well.

  7. says

    I normally take profit when stock moves up 10-15% in six to eight weeks. That’s 60-90% annualized return. You can never lose by taking profit. For the last few years, this method has yield me over 30% return. There is a risk that I may miss on a big rally when this market shoots up. But, I’d rather do that then to let go my profit. Only one stock that I keep buying on weakness is Apple. I think it is way cheaper than even those safe utility stocks that everyone loves to buy in a shaky market with over $110 per share cash on hand.

    • says

      That’s what I was thinking….. 60% annualize return? Forget it, sold! Alas, I’ve jumped right back in as I’m bullish. I’m happy with locking in a 4% outperformance, and I do believe the markets will recover this year, but it will be bumpy.

  8. Tao Te Ching says

    I have followed your blog. Kudos, it seems to be going well.

    You are throwing out numbers that make most people feel that they do not have the level of wealth that you have.

    Then you make claims about how much money people make in the Bay Area compared to the rest of the U.S. and how much people make who work for Google.

    Is that intentional or just something that needs correction on my part?

    Tao Te Ching

    • says

      Because all sorts of people visit this site, I need to preface things at times. Long time readers will know the background, whereas new readers might be taken aback.

      I do believe there is more wealth out there than people know.

  9. says

    I actively trade my portfolio. I haven’t owned a mutual fund in my 401k for about 2 years now. The first year I managed it wasn’t that great, only a 4% return. I’ll take that over a loss anytime. I did make a gain of 250ish% on one stock this year, sad to say that I didn’t have too much of my portfolio invested in it. That one trade alone put me up 14% on the year, now after a couple losses, my gains are only at about 5-6%. Like you I think we are top-heavy on the market, even with the recent pullback we have experienced. I think I’m close to 65% cash right now waiting on the sidelines, although I did just buy some CLF (p/e of just above 5 is too ridiculously low to not buy some).

  10. says

    I think it would have to be a hedge fund – imagine writing the prospectus for a mutual fund which says “we can move half our funds into bonds without warning”. Haha, you’d make more than a few investors nervous… Nice work on the market beating though!

    35% -> 70% is a huge jump, and if you end up with the DJIA Note you’re going to have even more exposure. Are you ready for that, or are you going to diversify some funds away this year?

    • says

      Definitely a HF can only do this.

      Is there really pure exposure in the DJIA Note? There is 100% principal protection, so there is no downside except for the loss in interest income from a 2.3% 7-yr CD.

      These funds are only a slice of many various slices, hence there’s not point diversifying a diversification.

  11. rockchick says

    Is there a blog that you would recommend that is slightly more basic? I enjoy reading this one, but I can’t quite follow everything, as it is a little over my head. I would like to read another blog as a stepping stone to this one, if you have a recommendation. (I will continue to read yours as well!) Thanks!

  12. says

    I wish I took some profits when you did earlier this year, but the Canadian stock market index underperformed severely, in fact it is currently down about 14% year over year so if anything now would probably be a good time to jump in. Sound relationship advice as usual Sam. I think it’s true women prefer rich men to poor men but I wonder if the reverse is true about guys. At least for myself if I met a girl who’s pretty, kind, funny, fit, and smart, then I don’t care if she had money or not, as long as she’s not buried so deep in consumer debt that she’s insolvent.

    • says

      I can honestly say that of all the women I’ve dated, I’ve never once thought about their financial background, just them as a person.

      However, if I start to think about dating, and searching for women, I would probably choose the better background woman, if I had a choice. The difference seems to be that women are more intent on looking for men w/ this this “better background” vs. men.

  13. Darwin's Money says

    Nobody online ever loses money, way to go Sam! Score!

    And structured notes…I’ve looked into them in the past and for the most part, many of them you can build them yourself without the fees using options, treasuries/cds, etc depending on the structure you’re looking for. They are cool vehicles nonetheless if you’re looking to control downside risk, etc.

  14. G$ says

    Good job on timing that Sam.

    Markets have been pretty sad lately but I am a long term investor and plan on buying more! I prefer dividend paying stocks that consistently increase their payouts and trade at good valuations. Will experiment with incorporating some profit taking strategies to see if I can do better.

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