The Investment Recipe That's Stirring the Pot
When Value Investing Meets Growth and Momentum: Harnessing the power of a blended approach combined with a little patience.
Hello StockStars,
As I'm soaking in the Croatian sun, I couldn't help but share some thrilling insights with you.
After all, what's a summer without some sizzling stock secrets, right?
The "I Beat the Market" Epiphany
Guess what? I had my eureka moment with my program recently. And boy, does it deliver!
A quick heads-up: It's putting the Dow Jones to shame. But more on that in a bit.
If you’re new here, a warm welcome from my side! If not, you know what to do.
I’m Michael, your friendly stock guy, and I’m on a mission to make stock evaluation as easy as choosing your favorite ice cream.
Last year, I embarked on a wild journey to create a program that does the heavy lifting when it comes to stocks. Curious? Read the full story here.
Let’s move on.
Remember our last chat about the pitfalls investors often face?
(If not, read it here.)
Yep, those annoying emotions that can trip us up. It's a journey, mastering them. And by the end of our chat today, I hope to offer a fresh take on it.
As 2023 unfolds, so does my baby – TheValueVantage.com stock analysis program.
The deeper I dive into the tales of investment legends, one truth emerges.
They're all about persistence and sticking to a strategy.
Think of it this way: if you're switching investment tactics as often as a puppy wags its tail, you're setting yourself up for a fall.
The essence? Trust in a strategy comes with time.
How much time? Well, the pros believe anything less than a 14-15 year study doesn't cut it.
So, I've put my strategies through the wringer for a good 25 years, which means they've seen all the highs and lows – the romcoms, horrors, and thrillers of the economic world.
Let's get a bit personal here
My wife and I had a gluten-free bakery. Though it didn't pan out, it wasn't because our bread was subpar. Heck, one of our creations even bagged the Free-From-Hero Award.
Why the bakery talk, you ask?
Great question my friend. Investing is a lot like baking. Previously, standard recipes could steal the show. But as times change, so do tastes and personal standards.
Similarly, while you might find success with simple investment formulas, there are intricate strategies that can up the game a lot.
Consider the stalwarts like Warren Buffet with his Value Investing, or those riding on Growth Investment Strategies and Price Momentum Strategies.
They all have their moments under the spotlight.
But here's the million-dollar question:
What if you mix them up?
Well, I did just that.
The Magic Blend Revealed
Check out this snapshot.
Over 25 years, my blended strategy outdid the Dow Jones 72% of the time. We're talking a whopping 13.93% return from TheValueVantage.com, as opposed to Dow Jones' 7.26%.
Note: I don’t consider taxes and fees since they are for everyone different.
In the picture above you can see the performance in each year.
Let's put this in terms of cold, hard cash below:
Had you parked $10,000 with Dow Jones, you'd have seen a 419% growth. But with TheValueVantage? A mind-boggling 1,477% !
The best part
You get this all with less risk (mic drop moment).
The calculated “risk” (beta) for this strategy in relation to the Dow Jones returns over the last 25 years is approximately 0.85.
Recall here, what this beta is all about.
A massive difference in performance with less risk.
That’s a great combination, isn’t it?
Braking the script
Now, at this point, most brokers would play their sales pitch.
That’s the moment when most investment companies turn to you and ask you. Well, my friend, what do you think? And you are impressed by these numbers and tell them “Here is my money…”
But let's flip the script.
Let’s go one step further.
Let’s do something different.
Totally against what every salesperson would do.
Let’s look at that picture again.
So far so great, isn’t it?
Here’s a little thought experiment
What if you saw losses for three consecutive years before this strategy began to shine? Could you have held on for those first five testing years?
How would you feel when you would have looked at your account and saw that you are actually losing money – for three straight years?
And first after five years, you would start outperforming the Dow Jones.
Would you have stuck to the strategy?
Take a moment.
Remember Jack’s roller coaster ride.
The reality is, that this can happen.
Changes are real, that even with this clearly dominant strategy, there can come times when you don’t dominate.
We are talking about up to five years.
That’s why it’s so important to be clear on the time horizon when you start investing.
Rookie Mistake
Don’t even consider stocks when your time horizon is less than ten years.
Look at the table above.
Even after 10 years your money returns would be close to double as much compared to the Dow Jones. To get stability you need time.
The long run is where you win.
So don’t confuse trading with investing. Investing is a whole different game.
It's vital to remember: that investing isn't a short-term game. It's about the long haul.
In the grand scheme, this strategy, even with its initial hiccups, doubles the returns of the Dow Jones over a decade.
So, trading and investing? Apples and oranges.
The stock market is designed to transfer money from the active to the patient.
Warren Buffet
Again: The key is patience and controlling these pesky emotions.
One more thing
I'm stumped for a catchy name for this winning strategy. I still don’t have a name for it, so maybe you have a good idea of how we could name this strategy.
Got a suggestion?
Drop it below.
What’s in it for you?
If yours catches my eye, how does a year's free access to the future pro version of TheValueVantage.com sound?
Behind the Scenes
Progress:
The blended investment formula project name “ValueVantage 2.0” is tested and sound.
Plans:
Improve ValueVantage 2.0 and try to get it to 20% average annual returns.
Project name ValueVantage 3.0
Where’s my head?
I love the progress in the last couple of months. It was a big breakthrough moment for me. There is still a lot of work to do and I’m looking forward to it.
My wife told me, that I need - a hobby.
She thinks I’m too consumed by TheValueVantage.com. I see where she is coming from and understand why she thinks so. There are some valid points in her hint. In the last 12 months, I was neck deep in learning Python and a lot more about investing. Yes, it was pretty one-sided.
That’s why I investigated a potential new hobby.
And here is what I came up with.
I plan to do my private pilot license (PPA). I’m fascinated by planes because I think it was a huge milestone for humans to bridge the gap between continents without traveling for months. So I have to find out the details and do the medical checks as well. Looking forward to it :-) I keep you posted.And if you want the recipe for that gluten-free, vegan award winning bread, jus drop a comment below.
Until we meet again, au revoir StockStars!
Michael
Disclaimer:
The information in this article is my personal opinion. It is not consulting, nor does it constitute investment recommendations.
I do my research carefully and follow my personal investment strategy.
The stock market is a complex building with its own rules. They are no rules set in stone, like the rules of physics.
Therefore, use the contents of this newsletter at your own risk. Investing in the stock market can always lead to a total loss of the capital invested.
Great write-up