One Commonsense Insight That Can Improve Your Investment Returns
Approach investing by using theories that are backed up by the data AND have a good common-sense/intuitive explanation. One theory that has both is this: Invest in companies that have a track record of producing profitable results.
There are tons of theories on how to invest in a manner to maximize returns. Unfortunately, most are just that theories that are NOT backed up by the data. There are also, "data miners" who can back up their theory with data that does not make sense intuitively.
I prefer to approach investing by using theories that are backed up by the data AND have a good common-sense/intuitive explanation.
One theory that has both is the following:
- Invest in companies that have a track record of producing profitable results.
The "profitability premium" or factor is well-understood, well-documented, AND persistent and pervasive over time.
The linked article shares some background on this valuable insight that, in my opinion, is important to include in an investment strategy. Read the article here.
- Are you leveraging the Profitability Premium in your investments?
Or could you use some guidance and support applying the "Profitability Premium" approach to your current investment plan?
Feel free to send us an email or give us a call. We'd love to have the opportunity to hear about your situation and your thoughts on this post.
Enjoy the read and remember, it's NOT about the money. It's about how the money supports your goals!
At F5 Financial Planning we focus on helping individuals and families find balance between faith, friends and family, fitness and finance. We make sure that they have the financial freedom to enjoy those things in life that are important to them. And while we believe the left-brain facts and data are critical; we work with our clients to get them in the right state of mind to focus on the goals they want to achieve.
Some other posts that you might like:
- Should You Pay Off Your Mortgage?
- How Are DFA Funds Different than Index Funds?
- How Families Can Calculate Retirement Income Wants Versus Needs
- What Your Grandma Taught You About Investing
- Making Sure You Can Collect a Paycheck in Retirement
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