The Power of One and Strong Convictions
As an Investor, putting your best idea to work is the key to growing, protecting, and preserving your wealth. The most successful investors have understood this for decades. Using Warren Buffett as an example, he has doubled the return of the S&P 500 during his investment career at Berkshire Hathaway by investing money in a handful of companies using the same approach for decades. Using multiple investment strategies and investing in hundreds of stocks does not necessarily provide investors with the growth and diversification desired. There are many investment strategies that are effective, but most investors are not likely to have an expertise on various investment approaches. Although there are hedge funds that provide multiple strategy approaches, they are not available to the average retail investor. Furthermore, if investors do qualify for investing in hedge funds, they are still likely to underperform the market over time as studies have shown.
Investors who have discovered a great strategy that outperforms the market with lower or similar risk benefit significantly over time from the power of compound interest. Diluting your investment strategy’s performance by combining it with an inferior investment approach in hopes of added diversification places a significant drag on potential gains. Unfortunately, if you do not have a well thought out investment approach that you are confident in then there will be a tendency to invest in a variety of investment strategies mainly because you lack confidence in the investment choices that you are making. Gaining confidence in a particular investment strategy requires strong research or asking a lot of questions about the investment approach that you are considering as a means to acquire the necessary trust in your investment choices.
Retail investors in particular struggle with choosing the right investment strategy on the equity side of the equation. It is critically important to make the correct equity decision after the final asset allocation choice is made as it will drive the bulk of your performance and wealth creation. All that is necessary is one equity investment approach. Now is the time to get your best equity idea on the table by doing the research to find the best fund managers or idea generators. Look for managers who have simple ideas and extreme confidence backed by sound and consistent research. Do not overlook the power of one equity approach developed by people who have extremely strong convictions regarding their investment style or strategy.
Unfortunately, searching for the most talented managers or idea generators will require untraditional search methods. At Investoristics, we have a great equity approach that has a history of success and is quite simple to implement. Our strategy has done well in difficult markets and has significantly outperformed the market over time with a lot less risk. If research is not your interest, then come and join “The Collective” where we have done all of the work on your behalf. Retail investors have to get more creative at finding effective investment solutions as traditional choices are likely to underperform the market over time. If you are seeking a new strategy for the new year then please contact us to learn more about our approach.
