Investing the Share Advisor Way
At Share Advisor, we believe you’re more than just a member of our service, you’re our partner. In life, you wouldn’t choose a partner without knowing his or her philosophy on love, children, finances, sports allegiances, or any number of important issues.
The same goes for financial advice. You don’t blindly hand your money to anyone claiming he’ll make you rich. Before you fork over your cash, you want to understand his processes, his practices, and what he stands for. From the beginning, The Motley Fool has stood by eight core principles of investing — principles that helped The Motley Fool’s U.S. service Stock Advisor earn market-crushing returns.
Here in Australia, we want you, as our investing partner, to share in our market-beating returns. Read on to learn the principles behind our successful investing approach.
Principle No. 1: Buy Businesses, Not Tickers.
This one is straight from the mouth of famed investor Peter Lynch, who generated 30% annual returns while at the helm of Fidelity’s Magellan mutual fund. At Share Advisor, we buy into a company’s prospects, its future, and its management. We’re not interested in trying to divine value from a stock chart, and we don’t blindly invest in a hot industry. We prefer to put our money in companies that we believe will generate shareholder value over the long term.
Principle No. 2: Be a Lifetime Investor.
We’re long-term investors, and we view a long-term perspective as the biggest edge we retail investors have over a short-sighted financial industry. But we don’t just buy our stocks and forget about them. We keep tabs on them, follow the news, study the earnings reports, and strive to learn more about the industries. We also add money to our shares each month, so we’re continuously saving and investing.
Principle No. 3: Time Arbitrage.
Closely tied to being a lifetime investor is the concept of time arbitrage. We’ll use the market’s short term focus to our advantage by focusing on companies that have payoff potential in a year-plus. While most investment professionals focus on 12 month price targets — or shorter — we’ll look for great companies that will payoff for years to come.
Principle No. 4: Diversify.
We believe in building a diversified portfolio, much like Walter Schloss, who generated astounding annual returns during his lifetime and held nearly 1,000 securities. We need not own that many shares, but a diversified portfolio protects us from the inevitable blips — and allows us to sleep well at night. Diversification can be achieved with as few as eight shares, and its benefit is generally exhausted by the time a portfolio contains 30 shares.
Principle No. 5: Fish Where Others Aren’t.
We’re not interested in following the crowds. We are interested in thinking for ourselves, doing our own research, and making our own decisions. This includes being greedy when others are fearful, as Warren Buffett wisely advises, and employing contrarian investment strategies as popularised by David Dreman.
Principle No. 6: Check Emotions at the Door.
We recognise that stocks will move up or down for a variety of reasons — and often these movements happen daily. We manage our temperament and don’t let our emotions affect our decisions. If stocks we like dip for an unjustified reason, we’ll load up rather than sell out.
Principle No. 7: Keep Score.
We believe in accountability and will track our positions from the beginning. We’ll initially track our returns right here in this newsletter. Then, in 2012 you’ll be able to track the performance of our picks, day or night, on our online scorecard. Does your broker do the same?
Principle No. 8: Be Foolish and Have Fun.
People are conditioned to believe that investing is too difficult for the average Joe saver — and that money issues are best left to the professionals. But we believe you can do it better than your broker — and we think you should have fun along the way.
There you have it: The eight keys to investing the Share Advisor Way. Though we Fools subscribe to the benefits of the eight principles, we are a Motley bunch and our styles do differ when it comes down to the nitty-gritty of stock picking.
The Foolish Bottom Line
If you can embrace the eight tenets of investing the Share Advisor way, we believe you’ll build long-term wealth through investing. Because you’re now part of the Share Advisor family, you have the added advantage of knowing that you’re never out there alone. The entire team is here to help you along the path to financial well-being. We’ll get you there by thinking outside the box and going against the mainstream as we identify a diverse selection of top-notch companies we’re comfortable holding for years. And along the way, we’ll do our best to share some Foolish fun!