By Dr. Harry Hamann (MBA), August 19, 2021

Success Factors in Investing: Do-it-Yourself & Higher Timeframes.

The question is: how do you generate superior investment returns as a private investor (only managing our own capital)? Let us look at the concepts of investing your capital on your own & the investment timeframe as an example. Furthermore, let us look at public stocks as an example. What are most investment managers (who manage outside capital) doing?

  • Focusing on the next 1-3 quarters (short term)
  • Targeting low volatility (investment return curve going up smoothly over time with low drawdowns)
  • Investing in assets that everyone in the market is buying (e.g. their portfolio more or less replicates the stock index)

What is the problem with this approach for you and me as private investors?

  • High Fees lead to under-performance: The investment manager is charging us 1-2% management fee (every year no matter what) and 10-20% performance fee (if he makes positive returns)
  • The investment manager has no "Skin-in-the-Game": meaning he has invested none or almost none of his own capital in the fund. Are his/hers and your interest aligned? No. This is called conflict of interest.
  • We could just buy the stock index as an ETF (Exchange Traded Fund) yourself with one click and pay way lower fees (meaning our returns is higher!)
  • The whole investment approach of most investment managers (short term, low vol, index replication) is structurally inferior

Consider investing your capital yourself. No one cares as much about your capital as yourself. You do not need to be Warren Buffet to achieve good long-term returns. You also do not need to spend a lot of time. This is all a myth. What is required most is common sense. A little bit of know how surely does help.

The point is: this is not rocket science and everyone can (and I think should) learn and do it. I think some of you would be surprised how powerful it is if you knew a little more about all of this.

Best regards, Harry

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