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Frequently Asked Questions

While you are new to Investing Daily’s Systematic Wealth, and before you post questions on our forum, please read through these FAQs. If you have a question about getting started, you can be sure that many others have had the same question before you!

How do I log into the Systematic Wealth website?

For general account questions and login instructions, and to control the messages you receive from Investing Daily, see Managing Your SW Account.

Can I get SW trade alerts as texts on my smartphone?

For general account questions and login instructions, and to control the messages you receive from Investing Daily, see Managing Your SW Account.

How do I contact Investing Daily to manage my Systematic Wealth account?

For general account questions and login instructions, and to control the messages you receive from Investing Daily, see Managing Your SW Account.

What is Jim Pearce’s strategy for beating the market?

Some investors believe it is impossible to beat the stock market consistently, so they choose to own index funds designed to mirror the market’s performance. That approach is okay by Jim Pearce if you are satisfied with merely duplicating the market’s average annual return, which is expected to be in the 4% to 8% range for the next several years as the global economy slowly recovers from decades of reckless borrowing that = a mountain of excess debt.

But he says the truth is you can beat the market over the long haul, and many people have done so.

In fact, there is no one way right way to do it as there have been many approaches that have worked with great success over the years.

Just as important as having a proven methodology for identifying undervalued companies is also using human judgment in knowing when to activate a buy signal and when to ignore it. No matter how good an algorithm is at finding hidden bargains, not every variable affecting a stock’s value can be converted to a mathematical formula.

For that reason, Jim uses his algorithm as a screening tool to identify stocks that meet our objective requirements, and then evaluate each one of them for subjective criteria that might disqualify it from consideration. For example, even though a stock may score highly based on the strength of its balance sheet, he may discover that it just lost a major contract with a big customer that has not yet impacted its financial results. In that regard it may help to think of the Systematic Wealth process as a funnel with several layers of objective screens – or mathematical formulas – in it, methodically sifting through thousands of stocks until only the fittest make it all the way through. At that point there are only a few dozen to evaluate subjectively, most of which are further eliminated from contention for one reason or another.

What’s left is a small handful of high-performing companies trading at big discounts to their intrinsic value.

Even then, not every one of these stocks is going to shoot up in value right away. But since no one knows exactly when everyone else will wake up and realize how undervalued they are, Jim says we are better off buying them while they are still cheap and then waiting for them to take off rather than miss out on the opportunity altogether. Even then, Jim’s typical holding period is less than six months since it usually only takes only one or two quarterly reports to reveal each company’s hidden value. Depending on which aspect of a company’s performance profile Jim is emphasizing, the potential gain can be anywhere from a “modest” 10% to 20% to more than 50% in that period of time. On a time-weighted basis many Systematic Wealth gains work out to annualized returns of greater than 100%, or more than ten times what index investors might expect in a typical year.

In that case, why doesn’t everybody invest this way? Well, as Jim noted above, many people have allowed themselves to become convinced that it just isn’t possible to beat the market on a consistent basis. However, much of that is due to the self-serving propaganda dished up by the packaged product pushers on Wall Street who make a lot of money selling index funds, annuities, and other forms of passive investment.

But we know better than that and Jim’s algorithm has the track record to prove it. That’s why Jim is proud to help you achieve Systematic Wealth.

What is Jim’s process for choosing trades?

The Rapid Profits Matrix employs three complimentary steps to help you profit. The first is a set of expert calculations that have beaten the S&P 500 for decades. The second is a proprietary tool that gets to the essence of what moves a company’s stock price. And the third is Jim’s good-old-fashioned human skepticism to confirm that the result of the first two components will stand up in the real world.

Step 1: Start with the Experts

Jim’s first set of tools uses Artificial Intelligence (“A.I.”) to think like some of the greatest stock market investors who ever lived. In order to do so, Jim hired a pioneer in the field of A.I. who read through what each of these experts have written on the subject, and then converted each one of those strategies into a series of mathematical formulas.

That means there is one mathematical formula for Warren Buffett, which is quite different from the equation for Peter Lynch, and so on. That’s because each one of these experts employed a unique set of rules for determining which stocks to buy, and which to avoid. For example, Warren Buffett has a penchant for value stocks that generate a lot of free cash flow, while Peter Lynch was more interested in companies that are able to grow sales at a higher multiple than the market values their earnings.

Furthermore, Jim also designed the RPM to look for agreement among two or more of our experts to maximize the probability of success. Over time Jim has learned that when more than one of our expert formulas scores the same stock highly, both the average rate of return and the success rate improve significantly. Think of it this way; if both Warren Buffett and Peter Lynch like the same stock at the same time, then the odds are pretty good that it is going to perform quite well.

Step 2: Include an IDEAL Stock Rating System

In addition to Jim’s expert formulas, he also uses Investing Daily’s proprietary IDEAL Stock Rating System to look for stocks that are either grossly undervalued or overvalued. The IDEAL system rates every company in the S&P 500 Index based on three variables – dividend yield, cash flow and relative valuation – and assigns a total score on a scale of 0-10 to each stock.

From a long-term perspective, dividends have accounted for over half of the total return of the stock market. In order to pay dividends and still have enough cash left over to invest in the growth of the business, a company must be able to grow its net operating cash flow on a consistent basis. And to determine the extent to which a stock is fairly valued, we look at the forward estimated 12-month P/E ratio since that reflects what is expected to happen in the future, not what has occurred in the past.

A company that scores highly according to all three of these variables is in a much better position to compete for investor capital, and it usually only takes one or two quarters of earnings reports for that advantage to become apparent to the rest of the market.

Step 3: Add The Human Element

Since Jim’s expert formulas tend to zero in on stocks outside of the S&P 500 Index, the combination of our two models allows him to look for opportunities throughout the entire spectrum of companies that trade on every major U.S. stock exchange.

That gives Jim the flexibility of emphasizing small-cap growth stocks when the stock market is in a particularly bullish mood, but switching over to large-cap value stocks when it pulls in its horns. He also looks at trends in specific sectors to determine if a company his system likes is in an industry that is fighting an uphill battle at the moment – such as the energy sector was in early 2016 – in which case he may skip over that one for another that is currently benefitting from more favorable market conditions.

Of course, if a company has recently experienced a major event that does not yet show up in our formulas, then Jim would eliminate it from contention as well. It doesn’t happen often, but occasionally a company will be sanctioned by its industry regulators or be accused of some form of corporate malfeasance that drives its share price down to what may appear to be a very attractive level even though the long term financial consequences of those events are not yet known.

How can I best use Systematic Wealth to my benefit?

Now that you understand how Jim manages the RPM, there are some things he thinks you should know about how you can get the most out of it as a user.

  • First, the RPM isn’t perfect and not every trade results in a gain. Even legendary investors like Buffett and Lynch understand that and strive for a success rate in the 50% to 60% range. But by limiting losses on the unsuccessful trades while taking big gains on the ones that work in their favor they are able to beat the market by a wide margin over time.
  • Second, Jim does not recommend that you “cherry pick” only a few Systematic Wealth recommendations, but instead spread your money across most or all of them to maximize the probability of success. He aims to have 10 to 20 open trade positions at any time, so dedicating 5% to 10% of your account balance to each trade should allow for proper diversification.
  • Third, because all of Jim’s buy alerts are intended to have a holding period of no more than six months, he also expresses SW results on an “Annualized Return” basis to make it easier for you to compare them. For the examples in the paragraph above, a 12% return over six months equates to annualized return of 24% while a 7% return over three months works out to an annualized return of 28%.

Finally, you should also know that Jim’s buy and sell alerts are very timely, and should be executed immediately. Once he closes out a position in a stock he will not issue any further alerts on it, so it is important that you follow along closely to our advice. In addition to sending out every Trade Alert via email, Jim also offers you the option of receiving them by text directly to your smart phone. See Managing Your SW Account to set up the text alert process.  

How will I be notified about Systematic Wealth trades?

As soon as Jim determines that a stock fits his Systematic Wealth qualifications, we’ll immediately let you know by email (and text message, if you’ve set that up – see Managing Your SW Account), so that you can take action as soon as possible. We’ll then continue to follow up on all open trades with detailed information on a regular basis, until the stock achieves maximum gains. Once we’ve determined that it’s time to trade out, again, we will email and text you immediately.

Can I use my current brokerage account to trade with Systematic Wealth?

To trade Systematic Wealth stock recommendations, you’ll need only a standard brokerage account. If you haven’t already opened a brokerage account, review the Financial Industry Regulatory Authority’s advice, and then start researching potential brokers using websites such as Investopedia and Barron’s. (At Investing Daily, we’re not affiliated with any brokers.)

How much money should I fund my account with to get started with Systematic Wealth?

As a general rule we suggest having at least $50,000 to be properly diversified and justify the cost of the service. We also recommend having no more than 20% of your account invested in any one recommendation, and having at least five positions open at all times. These guidelines assume you will be trading individual stocks, as the account minimums for options accounts would be considerably less.

Can I use options to trade Systematic Wealth recommendations?

Since call options are available on most of the stocks recommended by Systematic Wealth, you can use them to execute our buy alerts. However, if you are going to use options to trade Systematic Wealth recommendations, you’ll additionally need to be cleared for options trading by your broker even if you have a standard brokerage account. See also How do I choose an options broker? How do I get approved to trade options?

I’m new to options trading. What do I need to know?

To start off on the right foot, read Investing Daily’s Introduction to Options.

How do I choose an options broker? How do I get approved to trade options?

If you don’t currently have a broker, please see Comparing Options Trading Brokers: Which One is Right for You? for a list of some brokers that are highly rated by Barron’s Magazine. (We at Investing Daily receive no compensation for recommending any of these brokers and simply offer this tool to help our new members get started.)  The brokers we see mentioned most often by experienced Investing Daily members are TD Ameritrade’s thinkorswim, Fidelity, E*Trade, and Interactive Brokers. When trading options, you can either phone in your orders and speak to a live broker or you can input the trades online yourself using the broker’s website.

Here are a few tips to help you answer the authorization questions:

Investment Objective

Your best chance for a high trading level authorization is if you put down “speculation” as one of your objectives. Selling put credit spreads at an appropriate position size is no more speculative than buying shares of stock, but brokers seem to think all option trades are speculative, so you will want to state “speculative” for the sake of your broker’s policy guidelines, not because you actually intend to trade speculatively.

Trading Strategies

The more strategies you check off, the better your chances of getting full authorization. Feel free to check off all of the strategies listed even if you don’t initially plan on trading all of them.

Trading Experience 

Don’t be shy when answering this question, but honesty is the best policy. The more years you say you’ve been trading stock and options, the higher your trading level authorization will be.

Net Worth

Higher is better, but again honesty is always the best policy.

I only got approved for Level 1 or 2, but I want to trade spreads. What do I do?

Several of the trading platforms, including Think or Swim and OptionsExpress, allow you to do “paper trades” as a way to practice options trading using fake money.

Paper trading is a great way to increase your trading experience (and confidence!) so that you can reapply for a higher trading level than you were initially granted.

Read more about paper trading here.

How do I communicate with Jim Pearce and the other Systematic Wealth members?

As much as we would like to talk to each one of you individually, federal regulations prohibit subscription companies like Investing Daily from giving personalized investing advice – that’s something a licensed financial planner or stockbroker would do.

At Systematic Wealth, the best way to communicate with Jim Pearce and the other Systematic Wealth members is through the Stock Talk forum. This is where experienced and novice members come together to learn from each other and help each other out.

A Stock Talk posting form appears at the bottom of all website alerts and articles. If you have a question or comment pertaining to one particular alert or article, please post your question at the bottom of that alert or article.

If you have a question about trading in general, the answer can probably be found by searching using the white Search bar in the website’s upper right. If you don’t find your answer, the Forum lets you begin a discussion about a particular topic or join in other ongoing discussions.

Please be sure to read all of these “Frequently Asked Questions” before posting any questions. Many of the questions that novice traders have are already answered in the FAQs.