So, you want to be a stock market investor?

It seems you think you’ve got what it takes.

It’s a wise decision to explore investing in a timeless asset class known for its potential to generate wealth, often substantial wealth

Based on my experience, I’m confident that you possess the necessary qualities to realise your investment goals. 

But before we get too carried away, let’s bring some realism to this. The stats suggest that the odds are stacked against you.

As a mentor with almost 20 years of experience, I have seen portfolios ranging from not bad at all to best keep that to yourself. Very few people have a system in place that perfectly maximises what the stock market offers, which is consistent compounded growth for life. 

The simple reason for this is that there is a knowledge gap between execution and ROI. Many either use outdated techniques or bounce between short-term get-rich-quick schemes that overpromise and under-deliver. 

Repeat after me, ‘I’m better than that’. 

Do this correctly, and not only will you achieve numbers beyond what you think you are capable of, but you will also develop a unique set of life skills that you can pass on to your kids and loved ones to carry on your excellent work. 

Because the schooling system is not going to do it for you. 

The schooling system is excellent for building careers and getting people working. If you want to pivot from a lawyer to a landscape architect later in life, you can do that as well. 

But there is little to nothing on the internet about managing and investing your finances like a pro and suitable for you – the budding retail investor. Someone who has saved up a war chest of money and now wants to grow that further. 

How do I define a war chest? At least £10k to £20k+. Ideally, towards the top end of that scale. 

If you don’t have that, I recommend focusing your attention on working towards achieving that and away from the financial markets. Turning to the financial markets to leverage, say, £500 into £5000 in a matter of days and weeks is how people lose the £500 and never get off ground zero. For every one person that manages to slip through the cracks, there are 1000s that fail. 

Don’t do this. Just work your socks off. There’s no getting away from it. 

I appreciate this may not be easy, depending on your current lifestyle, but it is a very necessary step. Work 3 jobs if you need to, as I did in my 20s, to save as much as you can. 

Once you have that war chest, you are ready. 

In this article, I am going to give you the precise Blueprint that we have used for over a decade that has resulted in us creating some of the best retail investors on the planet, making me a sought-after international speaker and a hedge fund owner. 

But first, some housekeeping: 

1. Come into this as a blank canvas. Even today, I abide by the philosophy of ‘always a student’. I’m not dismissing what you’ve learned, but if you’re not getting the returns you seek, then logic should prevail that the money is in what you don’t know.
2. Embrace thinking long-term. Some aspects of life are proven and timeless. Stop overestimating what you can achieve in a year and underestimate what you will achieve 10. 
3. Appreciate that you will have to invest to be an investor. That should be obvious, but with the internet promising the world on the cheap, people seem to think generational changing wealth is simply a case of opening a broker account, funding it with a few quid and Bob’s your uncle – riches. As I said earlier, be better.

Ok, so with that said, let’s get into this…

Below is a concise 3-step Blueprint to transform your stock market experience into a vehicle for wealth creation and establish you as an investor worth noticing. 

And as a BONUS, I’m going to show you how to be not a good kisser but the BEST kisser possible. Alright, chill. You may already be one, but not how you think…

Keep It Simple Sweetheart – K.I.S.S. 

Keep it simple. Be a good kisser. 

As Leonardo da Vinci said, simplicity is the ultimate sophistication and investing in the financial markets is the epitome of that. 

The more complex an approach and the more think you understand it, the more intelligent you will feel, naturally, but there is little to no money in this. It will leave you stagnant when it comes to making decisions.

In simple terms, good investors: 

• Apply patience to let the market confirm a long-term direction, either bullish or bearish (but almost always bullish until it isn’t) 
• Find and shortlist the strongest stocks from the most robust sectors to invest in
• Execute a simple ‘trend following’ strategy that minimises losses and maximises returns

It is where art meets science. 

‘Zaheer, get on with it, Show me how to do it.’ My friend, I am training you in the most underrated investor skill – patience. The best things, without a doubt, come to those who put in the time to earn their stripes.

Let’s…

Dive…

In…

Actually, no first (joking)

My 3-step Blueprint is broken down as follows:

• Step 1 – When to invest (market conditions)
• Step 2 – What to invest in (asset selection)
• Step 3 – How to invest (strategy execution)

Let’s break each one down.

Step 1 – When To Invest (Market Conditions)

Understanding market conditions is crucial for successful investing, despite the often conflicting information provided by our media channels. 

The S&P 500 is the primary stock market index. It is an average of 500 of the biggest companies in the stock market. So this is how we use it:

• If the bias of the S&P 500 is bullish, we look to buy stocks.
• If the bias of the S&P 500 is bearish, we look to short stocks.
• If the S&P 500 is moving sideways and the bias is neutral, we either buy stocks that are still moving up or stand aside. 

How do we determine the S&P 500’s bias? Using the 200 simple moving averages (200sma) on the weekly and daily timeframes. 

A quick history lesson for you. 

Old-school traders used to draw charts by hand, which you can appreciate would have been a long and laborious process when looking at 100s, if not 1000s, of stocks. This made traders very selective with the information they needed on their charts. 

They discovered the 200sma to be a proven indicator of the long-term trend. 

• If an asset were trading above the 200sma, they would buy or go long.
• If an asset were trading below the 200sma, they would go short. 

They never went against this bias. Institutions still use this logic today, and so do good retail investors. If it aint broke don’t fix it, as per not too-well-practised saying. 

As you read, you will find that today’s approach is a fine blend of timeless investing techniques and cutting-edge trading technology. It is a hybrid approach perfect for busy retail investors like us. 

• Use cutting-edge tech to do all the boring work, such as sifting through 1000s of stocks.
• Use timeless investing techniques to seamlessly and efficiently compound your dough. 

Below is the current state of the S&P 500 (at the time of writing).

It has been trading above the weekly 200sma since 2010 (ignoring the CV19 blip) and most recently above the daily 200sma since January 2023 as it recovered from the -28% decline in 2022. 

Earlier, I mentioned that we are almost always bullish until we aren’t. In the table below, I have gone back to 1990 to highlight how many years (roughly) have been bullish vs. bearish vs. sideways using the 200sma. 

Note how our media channels are plastered with doom and gloom and an ever-impending market crash, yet it is the least likely scenario. There have been more sideways markets than bear markets. 

My logic is as follows: side with the bulls but protect yourself from the bears through risk and exit management. The end of the world can happen at any minute of the day, but until it happens, which may never happen or may have a lag of many years, profit from the bull market. 

As I said earlier, be a good kisser, and this philosophy of siding with the market forms the crux of it. 

Look put it this way: the hallmark of a good investor is one who focuses on capital protection first and lets the profit come to them. The only aspect of an investment that is out of our control is the outcome, so our job as investors is to maximise the chances of making that a profitable investment. 

The odds of this happening exponentially increase, siding with the market, not trying to defeat or outsmart it, which is what day traders and top pickers try to do and fail miserably. 

So that’s step 1: use the S&P 500 and the weekly and daily 200smas to establish market conditions. Ignore everything else. 

Once the right market conditions have been established, what stocks do we choose for the portfolio?

Step 2 – What To Invest In (Asset Selection) 

This is where good investors look away from the noise of our media channels, as all they ever talk about are FAANG stocks and the tech sector. Instead, we use cutting-edge tech to create a shortlist of the finest stocks the market has to offer. 

Pro Tip: The wealth is in stocks not found in our media channels. Otherwise, the world would be full of uber-rich investors.  

 

Let me explain my approach and the role of advanced technology in this process. I have created a 2-tier scanning and analysis process that starts with over 20,000 stocks, commodities and forex pairs and ends with the handful that makes it into my portfolio. 

Tier 1 – Market Scanners

I subscribe to a professional scanner that I have programmed with my proven Blueprint, which, at a click of a button, will go through the 20,000+ global list of assets in minutes. I will then be given an initial list of 50 to 500 assets, depending on how booming the markets have been that day.

Pro Tip: Stay ticker neutral. The performance of the stock pays us, not the brand name. This is where scanners are powerful.

 

The scanners have been trained to find the strongest stocks from the most robust sectors because there is a world of opportunities away from the tech sector. Money moves between these sectors and so by constantly scanning them, we are aligned with the flow of money.

Tier 2 – Bespoke Charting Tools

Once the scanner has worked its magic, I take the initial 50 to 500 assets and manually go through them using bespoke charing tools that I have developed. The process of scanning combined with these tools has been meticulously designed for us to cherry-pick stocks displaying an edge.

 

Now, what is an edge?

An edge is determining environments where you have more chance of making a profit than a loss. Here’s the thing…

If you cannot define your edge, you don’t have one. And if you don’t have one, you will get eaten by someone who does. 

When I ask people to define their edge, they give me random answers such as their risk management or their psychology. Both are essential, but these do not define an edge. 

An edge is where a stock has set up to meet a particular set of criteria that suggests if bought, we have more chance of making a profit than a loss. In other words, it is a high-probability stock. 

Here is the checklist of my edge:

 

The most powerful way for us retail investors to establish an edge is to use technical analysis, a flashy word for using charts, to establish an edge. 

Day traders are doing something right, and that is they are using technical analysis to make their decisions. Where they are going wrong using intraday timeframes, 1 hour, 5 minutes, even 1-minute timeframes, to be in and out of the market, chasing money and quick riches. 

It is a highly stressful way of living life, and the juice is just not worth the squeeze despite every day trader’s favourite expression, ‘I made lots of money’. Ask a day trader for a complete performance history over a year, and you will get a much clearer picture of what is happening. 

If they are making money, it is not worth the sacrifices that come with it. A life glued to a screen is not healthy, and it’s just not necessary. 

We stock market investors have simply moved our decisions onto the higher timeframes, using the monthly, weekly and daily timeframes, The benefits of this are beyond tenfold. It is where we do less work for exponential life-changing growth. 

I am often asked what good investing is. My answer will surprise you…

Pattern recognition. The particular pattern we are looking for is ‘long-term trends’ where an asset has moved up (mostly bullish, remember until it isn’t) for 12 to 18 months or longer. 

Technical analysis on the higher timeframes allows us to quickly identify if an asset has trended well in the past, as it is very likely to trend well in the future. As investors, our job is first to find these stocks, which is where Step 2 comes in, and then identify the start of the next trend and where an easily identifiable edge comes in.  

If you cannot find these stocks and then identify an edge to know when to buy these stocks, you will never make money. 

Over the years, numerous methods and indicators have been created to identify trends. I argue that many, if not all, are outdated, and that is simply because we have evolved and got better.

I created The 4-Phase Sequence Method (The 4PS method) to align with this mindset.

 

Through the scanning and analysis process outlined in Step 2, I identify high-potential 4PS stocks for inclusion in my portfolio.

I explain The 4PS Method in detail here. 

Warning: This will upgrade you. Be prepared! 

This takes me to step 3, which is how we profit from top stocks and assets. 

Step 3 – How To Invest (Strategy Execution)

Once we have established the right time to invest using the S&P 500 (step 1), and then shortlisted the best 4PS stocks using scanners and tools (step 2), we then need a trend-following strategy that meets the following mantras:

• The trend is your friend until the bend at the end
• Cut losers short and let winners run
• Compound winning positions only 

This forms the spine of your investment strategy. 

Each high-probability stock or asset is simply that high-probability. There are no guarantees, so how do we deal with this situation?

Do the following:

• Calculate entry points that maximise the chances of entering a winning stock.
• Use well-placed stoplosss that gives a stock the time and space to move and return a profit so you do not get stopped out on pullbacks and market noise.
• If the stoploss is triggered, the trend has failed, and the market has reversed.
• Risk no more than 2% per position.
• Spread your risk across a handful of high-probability stocks and assets.
• Cut out of losers with a small and insignificant loss. 
• Hold and strategically compound winners. 
• Rebalance every 12 to 18 months

Pro Tip: Never add to a losing position as this will accelerate losses when catching a falling knife. Reverse the process by adding to winners and accelerating the profit phase. 

I track and manage all of these positions in what I call The Asset Position Log (The APL).

Individuals you know will dismiss the stock market as excessively risky without understanding effective risk management strategies. Usually, the same people are happy to throw money at the crypto market, but that is for another day. 

Pro Tip: Risk is to be controlled, not to be feared. 

Throughout the 3-Step Blueprint, we are constantly increasing the chances of profiting. By the time we get to actually buying a stock, the odds are firmly in our favour. 

Once we start loading our portfolio, this is where mental strength comes in, and good investors remain cool, calm, and collected. I will cover investing psychology in another article. 

For now, you have in your hands a Blueprint that will completely revolutionise your understanding of how to invest and, when acted on as explained, will transform your performance. 

And there you have it. 

In summary:

• Step 1: When to invest (market conditions). Use the S&P 500 to establish high-probability investing environments and simultaneously block out media misinformation.
• Step 2: What to invest in (asset selection). Use scanners and charting tools to shortlist stocks displaying an edge that are likely to trend and outperform the S&P 500 over the next 12 to 18 months.
• Step 3: How to invest (strategy execution). Use a trend-following strategy that cuts losers short, lets winners run and compounds winning stocks to accelerate profit using a strict risk and exit management framework. 

I will leave you to read it through again, digest it and start working toward being the complete stock market investor.