I’ve spent ten years studying asset class returns.
From private equity, starts, international stocks, US stocks, high-yield markets, and many more.
To zero interest rates, the Covid-19 era of rapid economic change, and now, through the transition to this next cycle.
There has been carnage everywhere, from steep grocery bills and home insurance to two of the nation’s largest banks collapsing, with more likely to come.
I’ve come to terms with this one thing through all of this.
There’s no silver bullet in investing.
There is not one strategy or asset class that works well in every season.
Here are the last seven years*
2022 – Commodities – 22%
2021 – Commodities – 38.5%
2020 – Chinese Equities – 29.7%
2019 – US Equities – 31.6%
2018 – Cash – 1.9%
2017 – China Equities – 54.3%
2016 – High Yield Debt – 14.3%
Good luck picking the winner at the start of each year. It’s impossible.
What are the best assets I’ve found with that out of the way?
Buying growing companies at reasonable prices.
My investment team and I are avid hunters for growth.
We look at where capital is flowing and what companies, sectors, and markets are consistently moving up and to the right.
Which ones are creating the world we will be living in?
We love growth.
It’s the best business advice one can receive. Just grow more.
Growing the amount of money you have usually solves every personal financial problem you’ve run into, too.
But don’t overpay for it.
Overpaying for an investment is like paying $100 for a box of Kleenex.
You accomplish your need for more Kleenex but at a ridiculous price.
The same goes for investing; don’t overpay for the assets you want to buy.
And let me tell you, this is hard to do in practice.
Remember the IPO craze of 2021?
People were going nuts for these hot tech start-ups because of their enormous growth rates.
But they were expensive.
And how were they growing so fast?
They were spending a ton of money to grow top-line revenue.
It turned out to be unsustainable, and it all fell apart.
Let’s take Bark Box as an example – They IPOd in December of 2020, reaching a high point of $18.50 cents a share, fast forward to today, and the stock is trading at just over $1.
They had significant growth, but it cost a fortune to get it.
When the growth stopped, the company’s share price was destroyed.
What did my team and I do? We avoided the IPO craze like the plague. Why? The growth was great, but the price wasn’t.
Here’s the deal: as you allocate your money across your investment accounts or business, consider the growth and price of what you want to buy.
This middle ground has been a great way to take advantage of growth while maintaining discipline regarding the valuations we pay for companies.
This is technical stuff, but I can’t tell you how many conversations I’ve had with people of the years who chased the “hot” investments only to get burned. They bought growth and forgot about the valuation.
Don’t let this be you.
Summary:
- Buy growing assets at reasonable prices, always.
