As is the case every year, the middle of June brings a growing sense that investor interest in the market is waning. There is likely a direct correlation with the onset of summer vacation, though I haven’t done the research to link the two together.
Regardless, before your brain logs off for the summer, make sure you remember one simple investing rule to build and protect your wealth over the long term, whether you follow the market closely or not. The rule is that the only investing strategy that works is the one that you stick to.
It sounds overly simple, I know – find an investment strategy you believe in and stick with it. However simple it may sound though, most investors still fail to take this simple approach. And it costs them.
Many retail investors seek out the latest and greatest investment strategy and stick with it just to the point where it ultimately fails to meet their short-term expectations. And then they change.
The reality is that even a great investing strategy won’t work in all market conditions. There will be periods of both underperformance and outperformance. What matters is how you do over your investment time horizon. And that means sticking to a strategy.
Choosing investment strategies isn’t like dating – you can’t try one out for a little while to see if there is a potential match. A successful investment strategy is a long-term relationship that requires commitment, discipline and conviction.
Personally, I love small-cap stocks. And I love holding them for the long term. To me, investors who pay attention to small-cap stocks and want to outperform the market are starting in the right place for a very simple reason. This asset class has outperformed large caps over the long term, despite the fact that small caps are much more volatile. And I expect small caps will continue to outperform in the future.
Yes, small-cap stocks get hit hard during market corrections. But still, small caps are an absolute must for any portfolio.
In my Game Changers advisory service we’ve been sticking primarily with small- and mid-cap stocks. And the simple strategy has helped us outperform the market with 73% of our current positions. Our average gain is 76%, and the biggest loser is down just 3%.
My overarching strategy is relatively simple. I look for small-cap stocks that have significant exposure to the major growth trends in today’s global economy. These aren’t one-month, three-month or six-month trends. I’m looking for major, multi-year trends that companies will benefit from.
This means perfect timing is less important than getting invested in the first place. Each stock has legitimate potential to more than double in value over the coming years.
Investing in small-cap stocks that are benefiting from the world’s most powerful and durable trends is the overarching strategy that I follow. It’s part of our core investment philosophy in Game Changers. And its simplicity helps me stick with it through thick and thin. For that reason, and the long-term performance of the asset class, I expect to significantly outperform the market.
If small caps aren’t part of your strategy, you should consider giving them a second look. Take your time to consider if the asset class is right for you. And if it is, consider a trial subscription to Game Changers to help you find stocks that you want to hold over the long term.
When you’re ready, I expect to be sticking with the same strategy that I use today.