There are many investment strategies, but I’ve always found it’s best to learn from them all and incorporate them into your investing style. The market is a complex game – it’s always changing, has a global dynamic, and is very tangibly real to all of us. One thing I’ve learned is that no single strategy works forever – people will figure it out and begin to front run you. You have to adapt to the game, change your strategy constantly, and always look to make the best of the situation in the present situation.
I personally am making a ~28% CAGR for the past 5 years – something I’m quite happy with as this is well above the S&P 500. I’ve dabbled in a lot of different things, and below is what I’ve found works for me. I’ve had losers, I’ve had 10 baggers, and some stocks I’m still bagholding. Here’s what I’ve learned in my tenure investing
- Growth investing can be worth it – but it’s highly volatile, unreliable, and fleeting. It can be here one day and gone the next.
- don’t make your portfolio 100% Growth. You will have a downturn, and it will be ugly.
- Know when to exit – have in your mind a fair valuation. Use Price/Sales and Price/Earnings to begin to notice when they are running away. Remember, Tesla is a very rare exception, not the norm. Don’t’ ever expect your stock to be the next Tesla.
- Sometimes with these it’s best to exit with a loss. Bagholding bad stocks costs you money if you can put it somewhere else that will give you a better return.
- On a side note, I also want to say I’ve almost never made money on an OTC penny stock. I really try to stay out of these now – this is prime pump and dump land.
- Value / blended Investing is tried, true, and safe. Will it make you rich quickly? Absolutely not, but you’ll sleep safe at night and know there is a good chance in the future you’ll be better off than you are today. My recommendation is to keep something in more stable blue stocks to help anchor your portfolio. This can come in different forms
- Tech blue chips (Amazon, Google, FB, Apple, Microsoft) consistently outperform the market. There is no shame in owning them.
- Non-tech blue chips are interesting, especially when you notice they have a chance for innovation and changing how they fundamentally work. Think something like Disney when they began Disney+. Another example is a lot of Warehouse REITs have been putting solar panels on their roofs and becoming huge energy generators.
- Don’t be scared to buy an ETF. Most of us don’t have time to research every industry and find all the winners and losers. Many times an ETF will help sort that out – if you think the industry is going to go up, just buy the whole industry and reap the reward.
- Learn options & understand the risks. Personally, I know I’m not very good buying calls and having them work out – I rarely do this. Only when it’s exceptionally cheap and when I think the market really is missing something.
- One of the only options I’ve bought is on commodities a few months ago betting on inflation. I’m a big fan of Burry when he was talking about this and did my own DD afterwards.
- Your current stocks are assets, use them like assets. I use covered calls and lend my shares for collecting additional income
- I sell covered calls 1 month out to collect a small premium. I normally price them 30-50% out of the money, so not likely to be called out (and even if they do, I probably made a good return). I’ve only once this year had my stocks called away, but I’ve collected well over what that cost me in premiums. These are especially great when the market is trading sideways or going down and helps ease the pain a little.
- I lend my shares. Lots of people don’t like this, but I plan to hold many of my shares for years. I don’t care if someone shorts it for the next 2 months and the stock goes down. If it’s a high quality stock the price will return, fundamentals always win out in the long run.
- Don’t FOMO – if everyone is talking about a stock on Youtube & Reddit and it’s getting pumped by more than 5-10%, you’ve probably already missed the boat. You’re not on that ship anymore, you’re the bait on the fishing line. It’s had its run up and it’s been priced in. Very small chance that stock doesn’t fall (and likely fall hard) in the coming weeks/months. Look for the Redditors & Youtubers that TEACH you how to fish, not those laying the bait.
- Remember, the only person responsible for your portfolio is yourself. It’s your money and your choices.
- Use margin as needed, not as your lifeline. My typical rule of thumb is keep my margin at 5-10% of my portfolio. I use it when I see an opportunity and just want to jump on it, but long term it’s a huge drag on your account. It can be worst than a drag too – if there is a down turn it will wipe you out. Look at our buddy Bill Hwang.
At the end of the day, I look to blend all of the above. Buy growth when you see something real special, park your money in safe & innovative blue chips most of the time, and occasionally use a very small % of your portfolio to buy a few options when you find asymmetric upside. Reddit & Youtube are great for learning, but don’t fall for the bait.
I hope this helps someone be a better investor and more importantly be more successful. If any of you have key learnings and from your time investing I’d love to hear them and try to expand my investment style, too. Please share!
