I truly believe there are fortunes to be made every single day if we look hard enough. The problem is, we all get busy with our lives and don't really bother. But I know you're curious about how to become a better investor because you found this post. Let's look at some insightful investment lessons from the most profitable trades. I strongly believe the more knowledge one has, the more wealth one can create.
Part of the reason why investors hand their money over to professional money managers is so that they at least know someone is spending their working hours trying to make them money, even if it is for a fee.
The busier I get, the more amenable I am to farming out more money to people who pick stocks for a living. That said, I'll never stop chasing unicorns. Now let's take a look at some investment lessons from the most profitable trades.
Some Of The Most Profitable Investments
The following is a historical infographic by Motif investing that shows how one could profit from world events. I used to have a trading portfolio with Motif and also consulted for them. Motif was acquired by Charles Schwab in 2020.
Investment Lessons Takeaways
Here's a highlight of four main investment lessons you should takeaway and utilize in your journey to greater wealth.
1) Everything is Yin Yang.
When you see oil prices going into the dumps, you should immediately think about industries where oil is a high input cost. There are almost always winners during major corrections of particular assets. Other input cost examples include wood, steel, and semiconductors for the housing, auto, and electronics industries. A scarier example is what happens to the markets during a major terrorist attack. Stocks collapse, and money finds its way into the safety of bonds. Interest rates decline and interest sensitive sectors eventually benefit.
2) Not everything is just good or evil.
Obamacare is a highly contentious political issue. If you are against forced health care and subsidizing health care costs for others with rising premiums of your own, you're angry. But wouldn't it have been nice to take your emotion out of investing and recognize that Obamacare is here to stay and to invest in a basket of stocks that would profit from Obamacare? The same goes if you were a renter who was frustrated by aggressive rent increases. Why not invest in a motif that will take advantage of rising rents?
3) Profiting from ideas has never been easier.
If you like to pick stocks or actively manage your portfolio like I do, for 10%-20% of my investments, it's never been easier to put your ideas into action. You don't have to painstakingly research stocks one by one. Obvious ideas for 2015 include: Obamacare, Geopolitical Tension, Wearable Devices, Vacation Properties, Luxury Goods, A Rebound In Commodities, Sharing Economy (Uber, AirBnb, DropBox, Thumbtack, etc) and more.
4) There's no need to invest in what you don't comfortably understand.
The best performing stock market in the world is the India Nifty Index, up around 35% YTD vs. +12.5% for the S&P 500. I used to follow all Asian markets very closely in my previous job, so I'm kicking myself for not having some exposure to India. However, investing in a phablet motif that is up 40% YTD is a much more palatable investment because I can more easily understand the companies in the motif e.g. Apple. If I were to put my money in India, I've got to feel comfortable with the political winds that are always changing. It's always better investing in what you know.
Spend Some Time Thinking About Your Investments
The reason why I spend so much time during slow periods thinking about my finances is because once the busyness begins again, I'll have already come up with a game plan to deploy capital in the most profitable way possible. I want to have a diversified portfolio of index funds, ETFs, and alternative investments based on how I see the world playing out over the next 12-24 months. I'll rebalance at least twice a year as always.
When I'm traveling abroad for weeks at a time or busy researching for my latest post during the day, the last thing I want to do is think about my investments. Actively trying to time the market is seriously a big waste of time. My goal is to come up with an investment allocation where I can feel comfortable forgetting about my positions for at least six months, no matter what happens in the world.
Invest in ideas for the long run, and only change those ideas if something structural has shifted. Buying a basket of stocks removes endogenous risk (like having a shady CEO, client concentration risk, lawsuit, etc). Riding long term themes over multiple years is what makes people rich.
Invest In Private Growth Companies
Consider diversifying into private growth companies through an open venture capital fund. Companies are staying private for longer, as a result, more gains are accruing to private company investors. Finding the next Google or Apple before going public can be a life-changing investment.
Check out the Innovation Fund, which invests in the following five sectors:
- Artificial Intelligence & Machine Learning
- Modern Data Infrastructure
- Development Operations (DevOps)
- Financial Technology (FinTech)
- Real Estate & Property Technology (PropTech)
Roughly 35% of the Innovation Fund is invested in artificial intelligence, which I'm extremely bullish about. In 20 years, I don't want my kids wondering why I didn't invest in AI or work in AI!
The investment minimum is also only $10. Most venture capital funds have a $250,000+ minimum. You can see what the Innovation Fund is holding before deciding to invest and how much. Traditional venture capital funds require capital commitment first and then hope the general partners will find great investments.