Should you buy all the companies recommended in the newsletter?

//Should you buy all the companies recommended in the newsletter?

 

Dear Fellow Investor

 

Key on a financial newspaper. Growing chart on the background. Camera Canon 5DThe following is a question subscribers often ask and something that may interest you too:

Must I buy all the companies recommended in the newsletter?

The simple answer in no, you should never invest in anything if you feel uncomfortable doing so, or if it is a company or investment you do not understand.

 

Buy all investments

However in terms of the companies recommended in the newsletter if you can understand how the company makes its money you should invest in all the recommended investment ideas.

Let me explain why.

We all have our biases and with investing it is no different. The same as me I am sure you also have industries and companies you like investing in and others you would rather avoid.

Hate gold love asset managers

For example I don’t like investing in gold mining companies as I lost money on them when I started investing (more than 25 years ago).

And I like investing in asset management companies because the business can scale so nicely (as assets increase costs remain relatively unchanged which means profits increase substantially).

Like these I am sure you have your own preferences.

Biases don’t help you

The thing is these biases don’t help us when investing in fact they lower your investment returns because, for irrational reasons, they keep you out of investments that can give you very high returns.

You don’t know the future

No-one knows the future so excluding some investment ideas because of personal bias or negative media coverage just makes no sense.

 

Getting back to the newsletter.

The newsletter’s investment model carefully selects investment ideas with a high probability of giving you high returns.

Not all ideas will go up a lot.

But it’s near certainty that not all the ideas will increase in price. Some will go up a lot, others not much and some will fall.

The problem is

The problem is neither you nor I (or anyone else) knows what investments will go up the most and what will decline.

 

Let me give you a few examples from companies recommended in the newsletter.

Pandora +173.1%

Would you have thought that a small Danish jeweller would have given you such a large return after falling 66% due to a profit warning and a huge inventory write-off?

Regenersis +148.5%

This attractive return came from a small UK company that does the guarantee repairs for large consumer electronics companies.

William Hill +118.1%

You would have earned more than 100% if you bought this large old mature UK based gambling company in December 2010.

Alliant Techsystem +112.6%

You would also have more than doubled your money on this undervalued US defence contractor, at a time when analysts were expecting even more defence spending cuts in the USA.

Western Digital +92.5%

Who would have thought that this large computer disk drive manufacturer could have given you such an attractive return?

Roularta Media Group -42.8%

This investment (the worse since the newsletter started in July 2010) lost just over 40% in spite of this Belgium based published already being nicely undervalued when it was recommended in April 2011.

 

Only 2% in any one idea

Because not all the newsletter’s investment ideas will do well is why you should not invest more than 2% in any one of the ideas.

 

In summary – your simplest and easiest strategy

Because neither you nor I know the future and our investment preferences (biases) lead us in the wrong direction the simplest and easiest strategy for you to follow is to invest (not more than 2% of your portfolio) in each of the companies recommended in the newsletter.

Model gives you the highest returns

Not only that but as numerous research studies of quantitative decision making models (such as the one used by the newsletter) have shown that the best results are achieve if you strictly follow the model.

This means that any filtering you undertake will only lead to lower returns.

 

Profitable investing

 

Tim_sign3

 

PS If you are interested is research on why any filtering (of the newsletter’s investment ideas) you undertake will only lead to lower returns click the following link: Painting By Numbers – An Ode to Quant

By | 2017-05-21T07:19:02+00:00 April 15th, 2014|