I am very excited about the upcoming launch of www.InvestByModel.com. When I started my business as an independent research analyst in early 2007, I focused exclusively on helping institutional managers (which I continue to serve). While I had no interest in managing investments for others, I wanted to figure out a way to serve individual investors efficiently in a way that would be meaningful to them. Well, thanks to my friends at RainBox Portfolios, I am getting in at the ground floor of what I expect to be a revolutionary change in the way individuals manage their investments.
How it works
Very shortly, I will be offering subscribers access to a model portfolio - The Top 20. This portfolio will be diversified by economic sector, will cover from small-cap to large-cap and will have elements of both growth and value. These are my favorite names at any given time. I expect the annual turnover to be between 50% and 80%. Subscribers will pay a monthly fee to receive not only the names of those stocks and any subsequent changes, but also some research that will help them to decide if it is an appropriate investment for them. The subscriber is free to replicate the model portfolio or to use it simply as an inexpensive source of ideas. Additionally, I will utilize this blog to answer questions about stocks in the model or any other topic of interest to my subscribers that I might be able to address.
Why "Invest by Model"?
Let's face it: The individual investor is in a tough position. On the one hand, they can delegate all authority to a professional, which often means high fees and/or inferior performance. Another option is to invest in a mutual fund or ETF that replicates the returns of the overall market. While I think that this actually makes a lot of sense for most people, not everyone is satisfied with being just "average". The third option, which has become cheaper and easier with the proliferation of online brokerages that have lowered commission rates and the increased availability of data and research via the internet, is to do it yourself. The DIY investor, though, often has a competitive disadvantage: They don't have the time and/or resources to do the best job that they are capable of doing. Make no mistake: Investing is an extremely time-intensive endeavor. Here are just a few of the things that I believe are required to be a successful investor:
- Thorough understanding of Technical Analysis
- Thorough understanding of Macroeconomics, Politics and Monetary Policy
- Time spent listening to conference calls and reading SEC filings
- Reading lots of magazines, newspapers and other sources of information
- Diving into the income statement, balance sheet and cashflow statement
- Understanding industry dynamics
- Making a judgment about the quality of management and the soundness of the business model
- Discipline in both buying, selling (and holding!)
I think you get my point. Even people who do all these steps and more struggle to "beat" the market.
If you are still committed to managing your own investments, is there anyway that you can keep your day-job but still take on this responsibility responsibly? I think so. What I am proposing is that you allow me to help you do your job better. My business model is to self-publish a somewhat interactive magazine, if you will. I don't want to touch your money, and I don't want you to feel like you are hurting my feelings if you don't do what I think you should do - you make the call. My job is to alert you to opportunities and, over time, to reduce or eliminate those positions when they no longer make sense. You get to leverage the efforts of a full-time investor with years of institutional experience and a record of identifying great investment opportunities. If you want to familiarize yourself with my approach to investing, review my articles posted on Seeking Alpha over the past 15 months:
The Invest By Model Advantages
Lack of Conflicts of Interest: I get paid whether you act or not - no churn
No Discrimination Against the Wealthy: Only in the asset management business are fees based on the wallet size
You Retain All Control: I help inform you, but you make the call
Accountability: It is easy to say "buy this" or "sell that", but my model will be judged daily relative to the return on the market
Full Disclosure: I post all of my holdings daily on my corporate website (www.ABanalytical.com) and will always disclose my position when I submit research or make a model change. In many cases, you will find that I own the stocks in my model, and you should be encouraged by this conviction. I manage a charitable foundation for my parents, and I would expect that I will always hold all of the holdings in the "Top 20" model in that portfolio.