Any investor can ignore your best advice and be wildly successful in achieving all of their personal goals including the ultimate one of total financial freedom.
I don’t care if you’re a professional with decades of experience, an amateur with an unworldly track-record or if you believe you’ve got the most sophisticated portfolio ever invented.
Somebody else can totally ignore what it is you’re doing and/or just flat out reject what you consider to be your bread and butter skillset, and be successful by doing the exact opposite.
That’s gotta sting a little.
But before you think of all of the reasons why I might be wrong consider the following few examples.
For every investor out there that has achieved financial freedom with a 60/40 portfolio there is somebody else that has done so with just a handful of “blue chip” stocks that have been patiently held and compounding for generations.
For those who suggest you’ve got to spread out and diversify globally you’ll find somebody who has achieved financial freedom by succumbing exclusively to home country bias.
And I’m not just referring to US based investors buying only US listed ETFs/stocks.
I’m talking about Swedish investors who own only Swedish stocks or Canadian investors buying exclusively Canadian equities.
Now at this point you’re likely chomping at the bit to tell me why that’s risky, doltish or flat out an inferior way to compound.
I hear you.
And you’re probably right.
There likely are better ways to compound from a risk meets returns standpoint.
Heck, even from a sequence of returns point of view.
Surely, some of these “strange portfolios” could be enhanced or improved by doing a little bit (or a whole lot) of this and that.
Yet, if you’re going down that route you’re missing the point I’m trying to make.
Despite all of that you’ll find folks who have done something that you find utterly cretinous yet it’s allowed them to reach all of their financial goals whatever they may be.
Hey guys! Here is the part where I mention I’m a travel vlogger! This investing opinion blog post is entirely for entertainment purposes only. There could be considerable errors in the data I gathered. This is not financial advice. Do your own due diligence and research. Consult with a financial advisor.
Examples From My Career As A Travel Content Creator
When I first started my travel blog in the early 2010s I wasn’t quite an OG but the industry as a whole was certainly very much in its infancy.
Those with more experience were trotting out advice like it was the Kentucky Derby.
“Content is King.”
If it’s not informative people won’t read it.
“Publish X amount of times per week and be as active as possible on platform A, B and C.”
Indeed, some of the advice being shared allowed certain travel bloggers to grow from amateurs to professionals.
Yet, I also noticed that there were those who ignored almost all of the general consensus wisdom of best practices while achieving wild success.
Some had contrarian personalities and covered niches that had yet to be written about where they built a loyal audience.
When I switched over to creating YouTube videos I noticed this more and more.
The most popular genre at the time was daily vlogging and almost everybody was hopping on that gravy train for a while.
Fast forward a few years later and most of the daily vloggers had either quit, burnt out or alienated their fanbase.
Although some found success making this style of video, many other creators went in a completely different direction creating pillar content that required multiple days of filming and editing to polish things off.
Instead of putting out content daily they’d release a video once a week, once every two weeks or even once a month.
“You’ve got to let your personality shine through in order to attract an audience.”
Most believe this and yet I can think of numerous examples where a channel has blown up by releasing videos where it is b-roll only with no speaking at all.
“Spread out and don’t put your eggs all in one basket.”
That advice has resonated with certain channels and yet others have become highly specialized niche experts going deep on only one particular subject.
You need to have punchy saturated colours, quick transitions and b-roll clips not extending beyond 3 seconds and yet some creators eschew this counsel by merely pointing the camera at their face and doing an entire monologue in just one clip.
In other words, there are many ways to become successful as a content creator just as there are numerous paths to becoming a prosperous investor.
My Best Advice: Expand the Canvas and Maximally Diversify
If I had to boil down what I feel is my “best advice” to pass on to fellow investors it would be to expand the canvas of your portfolio and diversify maximally beyond merely various stock/bond combinations.
I’d suggest adding capital efficient products such as $UPAR, $GDE, $BLNDX and $NFDIX and using the “extra space” that these funds create in your portfolios to further diversify into strategies such as global systematic managed futures, trend-following, long volatility options, long-short equity, market-neutral, merger-arbitrage, absolute return fixed income, real assets, gold, bitcoin and others.
It would be paramount to insist upon a globally diversified portfolio spread out between US equities, International Developed and Emerging Markets.
Furthermore, I’d want to find out your financial goals, risk tolerance and stage in your life/investing cycle to ensure that the portfolio is constructed in an optimal manner that manages risk first while offering potentially great returns second.
For example, if you’ve achieved financial freedom, have a bit of a weak chin and a reasonable burn-rate it might make sense to skew the portfolio more towards defensive assets and strategies such as managed futures, tail-risk options puts, absolute return fixed income and market-neutral equities.
Irregardless, what is eventually your customized portfolio needs to have an IPS (Investment Statement Policy) with a zoom-out, chill-out and let it be clause clearly stated.
There you have it.
That’s my best advice.
Now go ahead and literally ignore all of it and you can still find ways to succeed as an investor.
What would be the exact opposite of my approach?
Rejecting going global.
Only focusing on one asset class and strategy.
Trading and making portfolio moves without any rules based decisions.
Market-cap weighting over research supported factor strategies.
Ignoring trend and being entirely static.
Discretionary over systematic.
I’d want to puke.
Yet this might be what is best for you.
This might be what allows you to stay the course and achieve your wildest dreams.
And who am I (or anybody else) to get in the way of that.
All Of The Potential Portfolios Out There
When you think about it there are all kinds of mainstream and oddball ways to compound wealth out there.
Here are some that come to mind.
Stocks For The Long Run (equity only investing strategies whether they be Index or Factor ETFs or individual stocks)
Ferocious Fixed Income (a portfolio composed entirely of fixed income instruments)
Equity/Bond Mix and Matchers (a portfolio with 80/20, 60/40, 40/60 or 20/80 combinations of stocks and fixed income that tickles your risk tolerance fancy)
Long-only Risk Parity, Harry Browne Permanent Portfolio or Ray Dalio All-Weather (portfolios that add an “alternative sleeve” to the mix and also cap equity exposure)
Gregarious Gold Bugs (for those who just can’t get enough gold in their portfolio to the point of outshining other asset classes)
Adaptive Asset Allocators (the types of portfolios that have the ability to adapt by going long/short/flat any asset class they choose via a myriad of different futures strategies)
Hedgehog Defenders (a portfolio that is hedged by absolute return strategies across all asset classes that often features portfolio insurance as part of the equation)
Laser Eyed Crypto Comrades (for those pursuing exclusively digital assets while rejecting everything else as being old school)
Twitchy Finger Traders (discretionary managers who trade stocks, bonds, futures, options based upon macro opinions they’ve formed)
Observant Options Operators (specialists who trade options in a variety of different ways)
Of course I could go on and on and on but this offers a general mix of what most investors may be pursing out there.
Examining Stocks For The Long Run
I think one of the most interesting “single strategies” that we could unpack is a stocks for the long run approach where you’re 100% invested in equities only.
Isn’t that risky?
Your portfolio can be sliced in half (or more) under the right scenario when a bear market rears its ugly head.
For individual stock selectors you have the additional risk of the security you’ve invested in going belly up as a business with the consequences of losing it all.
Yet, if you do your homework and pick wide moat companies you’re likely going to be holding something more stable than fringe companies that pop in and out of indexes.
If you’re committed to the strategy for decades on end it’ll likely work out just fine.
Maybe you’ve over-saved, have a low burn-rate or an emergency fund that covers you during times of market turmoil.
There is someone out there that owns only McDonald’s stock that is wealthy beyond your wildest imagination and living financially independent from dividends only.
There is another person who invests only in the S&P 500 and chills out whereas some savvy individual is trading only micro-cap stocks.
You’ve got globally diversified factor investors, value vultures, low volatility linchpins and mid-cap mavens all compounding their way to financial self-reliance.
Your best advice might be to avoid all high P/E stocks at all cost and yet there are growth investors who gobble those up.
Diversify globally and do no succumb to home country bias and yet we’ve got investors out there with less stocks than you can count on your fingers fully invested in home country equities only thriving with that particular strategy.
Although I haven’t met them yet there is somebody out there that only invests broadly in Emerging Markets or in specific regions such as Latin America only.
You’ll find somebody using top-down strategies and analysis whereas others build their portfolios from a bottoms up approach.
Technical analysis versus fundamental analysis.
One investor is an expert at one while eschewing the other whereas some investors combine both.
Multi-factor versus single factor.
Barbell strategies versus high conviction singular approaches.
Minimum volatility over momentum.
You name it and someone out there is pursuing it profitably.
Investing Style That Matches Your Personality
Finding an investing style/strategy that matches you personality is crucial.
If you’re the type of person that likes to tinker, you’re going to struggle with a buy and hold approach while potentially flourishing as a tactical manager.
If you’re someone who can sit through a bear market and not obsessively check your portfolio you’ll likely thrive with a portfolio that involves permanent allocations.
Some investors prefer simplicity whereas others enjoy complexity.
The one-size-fits-all approach just doesn’t work and I’ve noticed the daily interactions between certain militant camps of investors that feel as though they’re going to finally convince the other side to see the light and vice versa.
For some it is Groundhog Day on Twitter 24/7.
The best investors out there are likely the most self-aware.
They do what makes sense for them and have an uncanny ability to ignore the constant noise and distractions.
There are numerous roads to Rome and we don’t all have to be on the same path.
Nomadic Samuel Final Thoughts
There are few pursuits in life that offer as many different potential pathways as investing.
Whatever I or anyone else believes can be totally ignored and you can still reach all of your financial goals by sticking with something that makes sense for you personally.
That’s not just true in investing but in most other pursuits in life.
I’m currently reading the Little Book Of Market Wizards by Jack D. Schwager and I’m mesmerized by how investors from all walks of life pursuing radically different investing strategies have all achieved success by following their bliss and ignoring everything else.
That to me is inspiring and where I’d like to wrap things up today.
That’s all I’ve got for now.