Why Your Plumber Neighbor Beats 87% of Pro Investors

Listen to the audio version of this article (generated by AI).

 

In This Digest: 

• Some brutal truths about staying ahead of the market 

• Gold stocks are breaking out – and this one is a top buy 

• Why this little-known “photon” trend is the trade of 2027 

Bad news for stock pickers… 

Imagine 10 professional investors in a private room at the cigar bar.  

They’re cradling their bourbons, puffing their stogies… huddled in a tight, power-stance circle… all trying to run intellectual circles around each other. 

These are guys who get paid to find the best stocks in the market. You might imagine they’ve forgotten more about investing than you’ll ever learn. It could seem an intimidating scene.  

Until you realize that, statistically, almost all these fine gents have spent the last decade underperforming the cheapest and simplest investing plan in the world. 

Data from investment research firm Morningstar confirms just 13% of actively managed large-cap funds outperformed their benchmarks over the last 10 years.  

That means about nine of these guys earn top dollar to lag the performance of your plumber neighbor, who just maxes his Roth IRA into a mutual fund that follows the S&P 500 every couple of weeks. 

Recent market history has been a lot kinder to stock pickers, to be fair. About 27% of those same funds have outperformed over the last year, as the AI boom made clear winners of semiconductor and data center stocks. 

But this perspective is invaluable to keep in mind.  

Since you’re reading this, you’re among that rare and wonderfully irrational class of investor who tries to beat the market even as the odds are against you.  

Don’t get me wrong – you’re in good company. But the odds don’t lie.  

Three-quarters of stock pickers have lagged the benchmark over the last year. Eighty-seven percent lagged it over the past decade.  

And these are professional investors who have armadas of analysts, rolodexes, and advanced algorithmic trading strategies at their disposal.  

If they struggle to beat the market… your odds may even be lower.  

So what do you do? 

Allow us to offer a simple, rational plan with room for outperformance… 

Trading is fun. But it’s only fun when your ideas make a profit or beat the market.  

When your trades lag the market – or worse, lose money – it’s the opposite of fun. 

When you have tools like TradeSmith’s at your side – like the Quantum Score, our quantitative stock rating system, our AI-powered Predictive Alpha algorithm, or our data-driven Seasonality software – they can improve your odds considerably.   

But another great way to insulate your portfolio from bad trades is to think of your portfolio like planet Earth. 

The core of your portfolio would be “the market” – something like the S&P 500 ETF (SPY). That gives you long-term growth and relative stability.  

Depending on your age and risk appetite, it can be a larger or smaller chunk of the whole. But for most people, 50% is probably the way to think about your portfolio core. The point is that it’s large, central, stable position. 

And what’s outside Earth? Satellites. 

Think of each strategy you trade as a smaller slice of your portfolio, operating as a percentage that won’t break you if it goes bust.  

If you trade options for income or speculation, think of that as a 5% to 10% satellite.  

If you trade one of TradeSmith’s algorithmic rotation strategies, that might be a 10% to 15% satellite.  

And if you like to pick stocks, that might be another 15% to 20%. 

How you structure your satellites is all up to how you like to trade, how active you are, and how much time you’re able to put into the market between reading great newsletters like TradeSmith Daily.  

But with a relatively large chunk of your holdings parked in the market, you’re well insulated from any one strategy underperforming. 

Just make sure to use our Health Indicators to monitor your core if you are a paid-up TradeSmith subscriber.  

Health is our bedrock momentum indicator. Measured on both short- and long-term timeframes, it measures each stock’s historical range of movement to create buy and sell signals.  

In the case of SPY, it’s green on both Long- and Short-Term Health right now and has been for the past three months. Following that has kept you out of all the AI stock drama and the second phase of the Iran War.  

With that plan established, here are two “satellite” trends to keep an eye on… 

The first is gold and silver stocks. 

As our own Jeff Clark mentioned on Saturday, investors have all but forgotten about precious metals in 2026. After a blistering run over the previous few years, gold bugs have fallen on hard times: 

Since the start of August, though, they’ve perked up. SPDR Gold Shares (GLD) is up 8%, and iShares Silver Trust (SLV) is up about 13%. 

And this group is a standout in our Project Heatseeker screener. 

Regular readers know Project Heatseeker is a system that finds the best-quality stocks in the market breaking out to 1-month highs. As of Friday’s close, the report was rich with gold and silver stocks – seven of them breaking out at once. 

And a standout in this group is Hecla Mining (HL), one of the largest silver producers in the U.S.  

Take a look at its current Predictive Alpha forecast: 

Regular readers know Predictive Alpha is TradeSmith’s AI-powered price forecasting engine.  

In the same way large-language models predict the next word in a sequence, Predictive Alpha predicts the next price move.  

Trained on more than 100 billion data points, it projects where a stock is likely to land up to 21 trading days out. 

Right now, Predictive Alpha forecasts HL to rise 5.6% from Friday’s close by Sept. 15. And it’s been accurate to the penny 73.4% of the time in the past.  

If you’re looking for exposure to precious metals, this stock is one to watch.  

We dubbed memory the trade of 2026. This tech is on deck to win 2027… 

On Nov. 6, 2025, TradeSmith Investment Report flagged memory and storage as the trade of 2026.  

That same day, we recommended shares of data storage chipmaker Micron (MU) – which has since gone on to rise as much as 409%.  

But we didn’t pick that trend because we had a gut feeling about memory storage. We just followed our Quantum Score – which picks out stocks with elite fundamental growth rates, strong price momentum, and unusually big buying volumes. 

And that same system is pointing us to a new trend today.  

Today it’s flagging photonics – the fiber-optic technology hyperscalers use to move data at light speed.  

TradeSmith Investment Report editor Lucas Downey recently pounded the table on photonics as the can’t-miss trade of 2027. And one of the top stocks in the sector is on a fire sale. 

Glass, ceramics, and advanced optics company Corning (GLW) is one of the key players in the data center photonics trade. And its Quantum Score shows why it’s such a strong buy right now. 

It scores a 77.2 overall. But that’s driven by a 90.0 Fundamental Score and held back by a lagging 68.2 Technical Score.  

According to Lucas, Corning’s business is firing on all cylinders. It raised its optical sales targets twice this year, now aiming for $20 billion by year-end and $40 billion by 2030 – backed by fresh multiyear supply deals with Amazon, Meta, and Nvidia.  

Shares hit an all-time closing high of $255.69 on June 29, then slid alongside the rest of the AI trade – they’re around $165 today, still 35.0% off that peak. 

Keep an eye on GLW and other photonics stocks. Our data strongly suggests they could be the Microns and Sandisks (SNDK) of the near future. 

To building wealth beyond measure, 

Michael Salvatore 
Editor, TradeSmith Daily