Skin in the game

There is a saying which is relevant in the investing world : “Put your money where your mouth is”. In other words, follow your own advice. There is no stronger motivator to do your due diligence, than putting your own money in the “game”. The on going slang for this process, is called “having skin in the game”.

In Q4 2019, I decided to look, and find sectors that in my opinion had a good chance of making profits in the long run, and invest in them. I came up with : Utilities, Disruptive technologies, Statistical/Mathematical Models, Opportunistic Investments. It took a long while of research, reading, and looking for analysts and writers in those fields. Not an easy process per say. I had to filter them by track record ( at least 5 years of proven results), investment philosophy ( was it valid in my opinion ?, was I comfortable with it ?), and understanding ( ergo did I understand the reasoning behind investing in specific equities and the metrics used).

On a side note, looking at the end result, it was an educational event, and showed me how vast and complex the investment world is. Found the right words that crystallized ideas I had : “There’s more than one way to profits”, “The way to profits is never in a straight line”,” Impulsive trading is detrimental to profits”, “Long term investing requires a certain level of risk tolerance”….

- Disruptive technologies: Companies that revolutionized the world, like Microsoft, Amazon, and Google did. Also, the ones like Tesla, Spotify, Uber are doing these days. The real trick is to find the ones in the making (AI, Block chain, Crypto Currencies, Biotechnology, Space, Quantum Computing, Cannabis, ect.), that will change the world. If you get on that train, before it leaves the station, you are set for life.

- Utilities: Companies that are active in fields like Water, Electricity, Oil, Telecommunication Services, Health Services. The ones that come to mind in no special order: Verizon, Exxson Mobil, American Electric Power Company, Gilead Sciences Incorporated And the list goes on.

- Statistical/Mathematical Models: There are no small numbers of successful investors that create their own algorithms, technical analysts ( that I call chart geeks) and contrarian ones. Decided to invest small amounts in this sector.

- Opportunistic: Pretty much self explanatory. Take for example the bear market Covid-19 created in transportation, tourism, entertainment…. In these periods, many good companies see their prices fall in the stock market. In my books, this is a good time to invest.

I created portfolios in each of the fields enumerated above, and will keep them updated monthly, during the first week of each month.

My benchmark for the portfolios will be S&P 500 index (trades on NYSE under the ticker SPY) except for the Utilities portfolio. There, my benchmark will be the utility index ( trades on NYSE under the ticker XLU).

Going to compare my results annually ,against the performance of the benchmarks.

My expectation is to do better than the benchmarks I set for myself.