The Investment Scientist

What is the Best Way to Make 10% per Month in Stock Markets?

Posted on: May 23, 2007

The title is a question posted to me by email, and the following is my answer.

In 2003, for a very short period of time, I achieved that type of return.

That was when Sarbane-Oxley Act went into implementation w.r.t. insider trading reporting. Before the implementation, company insiders (CEO, COO, CFO etc) had two month time to report their inside trades, and by paper; after the implementation, they had to report within two days electronically. At that time, I created a program to query the SEC insider trade database. As a result, I was able to follow the insider purchases as soon as they were reported. One or two weeks later, when the insider purchase news hit the wire (Dow Jones or Wall Street Journal), the stock prices would jump and I would exit with a tidy profit. At one point, I was making 30% monthly returns. In less than 6 months however, websites were popping up left and right offering real-time insider trading information, and my strategy became obsolete.

The point I want to make is: if there is a way to make 10% monthly return, it won’t last very long if there is no barrier of entry. That’s why in my current investment management practice, I do something others can not easily mimic.

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Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC.

Twitter: @mzhuang

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