Following up on the prior post about buying businesses rather than stocks, we also often get the question of:
“How do I earn a return BETTER than the market?”
The answer is it’s possible but almost no one can do it. The primary reason for this is behavioral. Most people simply don’t have (i) the patience to wait for crazy deals and/or (ii) the stomach to hold onto their companies when they go down in value.
But if you were to attempt to really “beat the market” we have one key piece of advice and it comes from a very successful investor named Jim Rogers who worked with George Soros (top three investor of all time). It is:
“I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime.”
This sounds easy, but is incredibly hard in practice because almost no one has this kind of patience. If you do have this patience however the best thing you can do is:
- Compile a list of the best business you know
- Determine a reasonable price you would pay for these businesses
- Wait until you can buy them for 50% of what you think they are worth
- Once you’ve bought, hold them and go on vacation
Every couple of years you can buy a number of these stocks when the market has a periodic freak-out.
When it does, you simply step in, buy the shares of the BUSINESSES you love, and then let time do its job to (i) revalue the business upwards to its true value and (ii) increase the true value of the business as it grows.
And that is it. If you have patience you can beat the market. If you think you can out-trade the market you will almost inevitably lose to those with faster computers and a sole focus in life of taking your money.
All the best,
Your Fortis Capital Management Team