In this video, Motley Fool analyst Austin Smith explains the recent Vanguard study that measures the correlation of common predictors to actual stock market return and talks about the ways to beat the markets without being able to predict them.
The results of the study are a bit depressing, because they show that these indicators aren't able to predict the market on a yearly basis, and even after a decade, some of the P/E metrics have a limited ability to explain where the market will end up. So what should investors do? Should we stay out of the markets because we can't predict them?
Austin says no and explains that the secret is being patient and buying into quality companies when they're cheap or when they have potential growth opportunities going forward -- including companies such as Apple (NASDAQ: AAPL), Baidu (NASDAQ: BIDU), Starbucks (NASDAQ: SBUX), or even Ford (NYSE: F). Austin says to be patient and let the stocks do the hard work.
Austin Smith owns shares of Apple, Ford, and Baidu. The Motley Fool owns shares of Apple, Baidu, Ford, and Starbucks and has short JAN 2013 $47.00 puts on Starbucks. Motley Fool newsletter services recommend Apple, Baidu, Ford, and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.