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Back in 2017, I unveiled a revolutionary way of analyzing your portfolio that could be a major breakthrough for millions of retail investors. Unfortunately, nobody reads my blog except for you. The unwashed hoi polloi meanwhile toil in ignorance looking for the holy grail of investments. They don’t realize the perfect, one-size-fits-all investment simply doesn’t exist. More importantly, they don’t know why.
Here you’ll find an introduction the concept of the Four Factors. Click here.
It’s worth reading again, but suffice it to say the perfect investment would have 100% of the following.
- Price Stability: In other words, your purchase price would always be the same or less than your sales proceeds.
- Fees/Expenses/Taxes: In other words, owning this investment wouldn’t cost you anything in terms of management fees, custodial fees, assessments, local taxes, state taxes or federal income taxes.
- Growth/Yield: In other words, there would be only upside and no downside and bigly. Growth would mean capital appreciation greatly outpaces inflation and yield means the dividend, coupons or rent are consistent and magnanimous.
- Liquidity: In other words, when you need to cash out you can do so without penalty, fee, risk of loss or delay.
So let me ask you, which investment has all 4 factors going for it? I dare you to reply to me with one. But you won’t. Not because you are timid or unbothered with intellect. Certainly not, dear reader. It’s because you realize it’s a fools errand.
The key then is to allocate your capital broadly using these four factors as a guide. Realize that if you pursue one or two factors above all others you may find yourself in trouble. Instead, ask yourself what’s the weak spot? Every investment has at least one and to varying degrees.
Source: History Channel
Then when a new investment fad hits the scene remember my wise counsel. If some wild-eyed Dane shows you his Tulip statement on December 12, 1636 ask him about price stability and liquidity assuming he speaks 21st century American English. If your neighbor touts the impervious merits of rental properties or crypto currency or fixed indexed annuities or tech stocks… He may actually be a salesperson at best or at the very best an easy mark for easy money.
Related: You Don’t Need an Emergency Fund