As individuals, our interest is often piqued by new or shiny ideas. Investing is no different, and a range of new, “trendy” investment strategies will always abound.
In most cases, funds that offer such strategies will charge higher than average fees for such services which in many cases erase any additional alpha such funds claim to provide investors.
The other problem with investing in such funds, or following such a methodology in picking stocks will result in investors picking securities that have performed well recently, not necessarily leading to better performance in the future.
Avoiding gimmicks or the latest trends in picking stocks will allow long-term investors to stay rooted in a key methodology and stick with said methodology for a period of time that will allow said investor to see returns over time; many safe, long-term investing strategies (i.e. value investing, fundamental investing) take years or decades to show outsized returns.
For example, over the past ten years, most value investing strategies have underperformed a range of momentum or growth investing strategies – that’s not to say all investors ought to jump into momentum strategies today.
At the end of the day, focusing on earning solid risk-adjusted returns over time is the way to go for most investors. Adjusting one’s portfolio to the level of risk one is comfortable with, and investing in companies that fall into such buckets will provide investors with a level of comfort over long time horizons, something that is very valuable considering the volatility of investing in the stock market.
Invest wisely, my friends.
