Investing for Dummies is quite a challenge! But who said investing was easy? Well today, we’ll talk about people who do find it easy. We’ve been discussing asset management in a crazy economy. Let’s talk about the masters of investing so that investing for dummies can be a snap.
Most Mutual Funds are a joke. Most of them don’t beat the performance of similar index funds which have lower fees. However, some mutual funds and stock holding companies are the investment vehicle of some of the greatest investors of our generation. By investing with them, you are able to achieve the same returns they achieve for a very small fee. They whole idea behind funds is supposed to be investing for dummies made easy, but if they do a lousy job, how does that help you?
A stock holding company is a company which is really a platform for investment by someone who prefers this vehicle over a mutual fund. It seems like they typically grow organically when a business owner grows his business and then starts acquiring other businesses outside of the core business areas of the original enterprise. The more this sort of growth happens, the more the company starts to look and function more like a mutual fund or hedge fund. The most famous example of this type of fund is Berkshire Hathaway which is the investment arm of Warren Buffett.
Each of them has his own style of investing. Some have particular sectors which they work within while others are more generalists. There are a couple ways you can put money with one of these masters. One is to do your due diligence on the fund or stock holding company and if you believe that this investor is in line with who you are as an investor and you want to add him to your team, you can simple purchase his fund or holding company and forget about it.
Another is to watch the markets and if you believe that the market is lining up to move in a particular direction, to then select a manager who is expert at investing in that exact environment and putting your money to work with the fund for that period of time. This might not be investing for Dummies 101 because it takes some understanding of what’s going on in the economy, but that’s what this blog and particularly our newsletter are here to help you with.
How to Invest
That being said, we’ll give you a couple examples to see what we mean, but make sure that you speak to your advisor before making any decision. We have certainly not given enough information here in order for you to make a decisions about investing solely from this post.
If you are bearish on the market in general. Let’s say that you believe the fundamentals of our economy are poor and that the stock market is probably heading down and the US Dollar is also going to be headed lower. We spoke earlier about shorting stocks. But perhaps an easier way to take advantage of this conviction would be putting your money with a manager who shares that perspective and has a track record of expertise in this area. What is great about this type of fund is that they have a professional management team experienced in reducing risk while investing short. This type of investing is often either intimidating or outside the area of expertise of most investors, but a fund such as this handles it for you.
The most famous investor in the world is Warren Buffett. He has made his reputation be investing in companies with a dominant position in their market and are selling at a compelling value. You can invest right alongside of him through his company or with similar other managers with a long track record of expertise who have done even better over the last decade. They might excel at picking international companies, blue chip stocks, high dividend payers, or any combination. Of course, these companies will probably go down when the market goes down, you can bet that a quality manager will find some incredible deals as they appear.