Long Term Investor

There are three different approaches - 

• Active Portfolio
• Index Investing
• Focus Investor

 

Active Portfolio

In an active portfolio strategy, managers constantly buy and sell dozens of common stocks each year. To stay on top, active managers try to predict what will happen to stocks over the next months, hoping to capitalize on their predictions by continually changing their portfolios. This concept could have a major impact on the inherent costs (fees) that accompany this high level of activity, which significantly reduces annual net profitability.

 

Index Investing

The index investment strategy is a passive buy-and-hold approach. It is most commonly used by investors with very low-risk tolerance and people who know very little about corporate finance and how to value a company but still want to enjoy the long-term benefits of investing in common stocks. On the other hand, we should note that the index investment strategy does not cost the fees of many purchases constantly (like the active portfolio), so index investment tends to have a better net return than actively managed portfolios if you enter the market at the right time.

 

Focus Investor

The core of the focus investing strategy is to pick a few stocks that are likely to produce above-average returns over the long term, focus most of your investments on those companies, and have the confidence to hold steady during any short-term market swings. Must be chosen outstanding companies no more than 20 companies even as few as 5 with a long history of superior performance and stable management. This stability also suggests a high probability of performance in the future, as in the past. We follow the Focus Investing strategy, which was pioneered and developed by Warren Buffett, as we also believe that there is strong evidence, both in academic research and in real cases, that the Focus investing strategy is successful. We also believe that the more diversified the portfolio, the lower the chances that a  few outperforming companies will change significantly our net results.

 

Finally, and as a summary, we must focus our portfolio on concentrating investments in outstanding companies with a greater probability of above-average performance. Always allocate investments and big bets to the events with the highest probability, as in the best companies we have selected. As long as the portfolio does not deteriorate, leave it intact for a few years, without a large rotation at most 10-20% per year