We hit on controversial topics often. Who knew the subject of time would get such attention?
It’s a funny thing to think about.
Time is something we all have. Some have a lot. Some have a little. And despite the idea that getting more time is at the root of everything we do, few folks ever bother to really think about it.
Most investors certainly don’t.
We argue it’s the most important variable in any financial equation.
Time is everything.
The idea takes us to a comment from Member Dan L. After reading our thoughts on time and investing last week, he wrote this:
Another of your articles with real-life ideas in the investment environment, Andrew. This is why I often am upset at articles that tout “make $10K per month” with this company or strategy, and they neglect to say that you need $200K to put into the position! However, at 70 years of age, I may have to look at how solid the “strategy” is, compared to leaving my capital in the Gone Fishin’ Portfolio. I would appreciate any further ideas you may have in the future concerning this matter.
Ah, the crux of the matter. Time versus risk.
If you’re unfamiliar with Alexander Green’s famed Gone Fishin’ Portfolio, you really need to work on changing that. It’s perhaps the simplest market-beating, diversified investment strategy on the planet.
It works. It’s no wonder Dan is questioning the ideas of other strategies.
If it were that simple, though, well… we certainly wouldn’t need 85 employees. We’d publish Alex’s pivotal portfolio and call it a day.
But it’s not that simple… Again, there’s that pesky element of time.
Members of the Club know that the Gone Fishin’ Portfolio serves merely as the base of our strategy-allocated portfolio. As Dan hints at… it’s the solid rock we build upon.
Alex’s pivotal work will make you rich… no doubt. But only if you’ve got the time.
If not, you need something more – something faster. There’s no question. If we want to make more money in a shorter amount of time, we must invest in a faster-moving strategy.
It begs the question… which strategy?
I wish I knew.
Sure, I can tell you which strategy worked best last year… or the year before. But I’d be only guessing if I told you which strategy will win this year or next (my guess, by the way, is Alex’s strategy that tracks insider buying).
Nobody knows what tomorrow brings. That’s what’s so head-scratching about the subject of time. We know nothing about it, what it will bring, or even how much we have.
That’s why I helped to create the Club’s strategy diversification model – an amazingly simple way to diversify your trading strategies that maximizes returns and lowers risk.
It’s virtually the same concept used to diversify a typical portfolio. But instead of focusing on spreading risk across different asset types, it takes advantage of the idea of strategy diversification.
That way, as one strategy outperforms the others, it lifts the entire portfolio. Better, it means we don’t have to guess what strategy (momentum investing, tracking insiders, trading bonds, etc.) is best… We’re exposed to all of them.
It’s the ideal approach for investors with a shorter time horizon because, by focusing on a variety of strategies, one of them is almost always significantly outpacing the markets.
But, to Dan’s point above, just because you’re making a few aggressive short-term trades in one sector or using options to play another sector doesn’t mean you have to abandon the idea of having a balanced, conservative core portfolio.
In fact, it’s just the opposite.
Instead of focusing your efforts on a single strategy and investing time frame, you must create a portfolio of strategies that offer returns across a variety of time frames.
Just like we wouldn’t put all of our money into a single stock… we mustn’t put it in a single strategy.
There’s no time for that.
Good investing,
Andrew
*The views and opinions expressed in this article are those of the author and do not necessarily reflect the official position of Wall Street analysts.