Sorry I have not been posting so much. I have been very overwhelmed and its harder to keep up with everything and also write for you guys. But I’m grateful for everyone who keeps coming back, who sends me questions and all that.
Today I want to share three simple truths that if you always remember will help your investing a lot.
1. Invest in Assets with Positive Expectancy
Stocks, bonds and real estate are the foundation of any good investment strategy because they earn better returns over time than cash. Therefore they preserve and grow your buying power far beyond what inflation erodes. So if you spread money across S&P 500, well structured real estate assets and bonds you’re likely to make 8-12% annually over time. This is known as beta and by itself it is a good way to grow your wealth over time.
2. To Generate Alpha, You need an Edge
Alpha is the returns you generate above and beyond the market’s beta return described above. To manage money professionally, it’s a good idea to be able to generate Alpha. And to do so you must have an edge something you have or know that the market doesn’t. For Vanguard or Citadel, scale and volume is one of their edges. For Warren Buffet, better information and access to insurance float used to be his edge but that has changed as information and research has become digital and democratized and capital has become cheap and plentiful. Now his edge is control, the ability to acquire companies outright, structure a deal how he wants as well as his reputation and cash balance. For activist investor their edge might be the ability to create the information they want to profit from or by forcing changes to the company. In the show Billions Axelrod’s edge was insider info. In my company, our edge is trading skill, long term orientation and operational control in some underinvested assets etc (we can make you 40-42% a year on your invested capital, Im required to tell you that). The point is to generate alpha, you need an edge.
3. Change is opportunity
I knew about Lululemon before Wall Street did. I understood Facebook better than a lot of analysts did. New things come up, paradigms shift and the game changes. All of these lead to assets being repriced, unit economics changing, etc which mean profit. But waiting till change happens can be late, it’s often best to anticipate change. And of course even better than that, is to create change which is why successful start ups command some of the highest valuation premiums of any asset class and venture capital makes 10x or more ROI.
With these three truths, you can graph your investment journey from stocks, bonds, real estate, commodities, business, start up and crypto currency and other exotic bets on the future. Investing after all, is simply a way to bet on and profit from the future.
Go make money!
My company can make you returns of around 40-42% on invested capital in a year, terms and conditions apply. If we can be of help to your investing results, reach out to me on Twitter @eldivyn and we can talk about your needs and our products.