The Best Investment Strategy is…
The best investment strategy is the one you can stick with. There will always be someone with a better portfolio than you in the short-term, likely because they got lucky or took a lot of risk. You need to have a basic understanding about how your strategy works so that you can stick with it when someone else is doing better than you.
Here’s the deal. Some parts of investing are cyclical. U.S. stocks and the rest of the world take turns producing the best returns, but end up surprisingly similar over the long-term. Likewise, different companies and industries become star performers for some period of time, but most don’t stay on top forever. One of the biggest mistakes you can make is to abandon a long-term strategy to chase the latest hot performer. Odds are you’ll make that move too late.
Worse yet, some investments are proven long-term laggards, but still have their day in the sun. You really don’t want to chase those either. Small cap growth stocks, on average, are among the lowest performing groups in any market over decades, but they are the best performing part of the U.S. stock market this year. That can make it awful tempting to buy some now if you don’t have a strategy you believe in.
I like our investment strategy because it targets potential premium returns that are easy to understand. It will take patience from time to time, but you can stick with it because you can understand it. So when your neighbor is riding those small growth stocks to glory (albeit short-lived), remember that neighbor also told you to buy bitcoin. Stick with the smart long-term strategy you have.
Oh, and call me if you need one of those.