How to stick to your imperfect investment strategy

Investment-Strategy

This article is a website version of our weekly FREE Best Ideas Newsletter sent on 18.04.2023. Sign up here to get it in your inbox every Tuesday.

Have you ever found a great investment idea that just didn't feel right? With that I mean, you just couldn't get yourself to buy.

The investment I could not buy

It happened to me recently. I stumbled onto an article mentioning a biotech company that was trading at less than cash.

I looked at the numbers and everything looked OK. I even asked a friend, and he also thought it looked good to him. (Please always do your own research).

But when it came to buying, I hesitated (has this ever happened to you?). As the idea was compelling, I asked myself why.

After a lot of thinking I realised that this was not my type of investment. It just didn't feel right.

What is my type of investment

I realise that my type of investment is a quality undervalued company with positive stock price momentum (an upward moving stock price).

I developed this strategy ever since I started investing in 1987. Through thousands of hours of research, reading and back testing. I even wrote a book on all the investment strategies we tested with a friend.

As you heard before this is exactly the strategy that we follow in the newsletter.

A strategy must be right to you

This was also the idea I gave you in the article How to find your best investment strategy – not the one you expect.

Here is an extract:

The best investment strategy you will ever find is not the one with:

the highest return,
the lowest Sharpe ratio
the lowest maximum draw-down
the strategy currently beating the market
the strategy that worked best in the last bear market

Your best investment strategy is:

The strategy you can stick with in good times and bad.
The strategy that lets you sleep comfortably at night, every night.
It’s the strategy that fits your nature and that you are comfortable with.

(You can find a list of all the best investment strategies we have tested here: Quant investing – best investment strategies we have tested)

Why you must be comfortable with it

The reason you must be comfortable with it is because it WILL underperform the market some of the time – this happens to ALL the best investment strategies.

And, sometimes this can go on for a few years.

The thing is - only if you are comfortable with your strategy will you be able to stick with it over these bad times, and that is what you must do.

It can't be just any investment strategy

It can of course not be any investment strategy.

It must be one:

That has proven that it works,
In different markets,
Over long periods of time,
In up and down markets.

But don’t worry about finding the right strategy that fits your nature, there are more than enough to choose from.

Perfect doesn’t exist

All strategies are imperfect in their own way.

What we have to do is convince ourselves that the strategy we have chosen is right for us (fall in love with it) so we can follow it through good and bad times.

You may find you have to do this often (I have to), especially when it is underperforming.

Your, helping you find the right strategy for you analyst

PS To find great companies that exactly fits your investment strategy right now click here.

PPS It is so easy to forget, why not sign up now before you get distracted?