I want to review one obvious approach in general is to adopt a general investing philosophy such as ERE or JL Collin’s “Simply Vanguard”. These are some level of pre-made, roll your own culture, C6s, although designed at different levels of sophistication. I suppose “Dividend investor” is a similarly a pre-made C6, but that style of approach feels limited since it is one of a constellation of strategies. The same is true for JL Collin's approach, in that it is just one small aspect to an entire finance, much less, life philosophy. ERE doesn't have that limit, ERE has an entire life philosophy behind it, but more importantly, ERE has very explicit flexibility built in. It is a system for building a life, not a prescribed solution. While ERE does have something to say about finance, it doesn't really give any ready-made model. In rough, it says you need to figure that out for yourself. I get there is the financial coursework jacob recommends. Is that how you build the deep models that become a general theory? When you can take any approach at any time, with practically total and absolute freedom within the investing universe, how do you create a your working philosophy?
I have some of my own philosophy, systems and models, but I want to hear other people’s approaches to the problem.
This is my C2/C3 list of investment strategies. Before reading it, I have some notes on its construction. These are labels for investment strategies, they don’t express how the strategy works nor do they express the strengths and weaknesses of these strategies. That means that some strategies could be considered goals (e.g. Limit losses), or tactics (e.g. Stop loss to implement goal of limiting losses), depending on how they are implemented.
This is not a taxonomy or meant to have too much rigor, these categories are just an effort to express the concept not to precisely label, nor is it complete, just an effort to capture some major strategies I’m aware of. I also know that some of these are strategies may sound the same to some. For example, some deny that you can gain alpha and thus would call many activities as synonyms for speculation.
I know many of my descriptions are very limited definitions, like MLPs, don’t get hung up on that, it is just meant to be enough to jog someone’s memory, not complete descriptions.
- Stock
- Index (See Multi-Asset)
- Value Investing
- Contrarian - Bet against the market
- Investor Psychology - Who will change their mind, why, when
- Dividend
- Stocks that expire - MLPs
- Preferred Stock
- Invest by {split by category}
- Bond & Debt
- Index (See Multi-Asset)
- Bet on interest rates
- Future Steam of Income
- Cash
- CD
- Savings account
- Under mattress
- Forex (Currency)
- Commodities, Gold & other valuable substances
- Invite ducks to swim in it
- Store it / Bury it
- Place in foreign country
- Hold stock (e.g. someone else stores the gold)
- Mining
- Futures contracts
- Over buy it (e.g. store 10 years of grain in your house)
- Real Estate
- Mortgage - Interest hedge
- Live-in
- Rent
- REIT
- Growth: Appreciation
- Value: Cheap, “affordable” area
- Grow - e.g. Plant things, share crop
- Mineral rights, oil, etc.
- Options
- Range-based (e.g. Value will be > x, < y)
- Approximately at the money - sideways markets
- LEAP
- Futures - Commodities
- (See multi-asset for many other viable options trades)
- Range-based (e.g. Value will be > x, < y)
- Skills
- Deep dive
- Economic - Gain more money
- Multidisciplinary study - Deep dive in a region of human knowledge
- Breadth (“...specialization is for insects” - RAH)
- Exploration - A form of play, without knowing what will come out of it.
- Insurance / Annuities
- Discounted “Fixed” payout (may adjust for inflation)
- Payout upon event (e.g. Death, age)
- Time-fixed payments (e.g. Secondary market, see bonds)
- Deep dive
- Private Businesses
- Run/Partner in business
- VC
- See stocks
- Intangibles
- Create or buy to sell/lease/litigate around copyrights, patents, trademarks, etc.
- Collectables & Expensive things
- Arbitrage
- Use while value goes up/stays flat (e.g. Classic cars)
- Multi-Asset
- Multi-Strategy (e.g. Diversification)
- Index
- “All” of {split by category}
- Closet Indexing
- Activist Management & Mutual Fund
- Beat the market
- Limit downside risk
- Timing
- Enter / Exit market on signals
- Enter / Exit market daily/nly, regardless of signals (e.g. Options expire, DCA)
- Tilt or partial retreat on {split by category} by signal
- Past Histories - e.g. Ray Dalio’s Decade-based strategy
- Buy and hold - "Our favorite holding period is forever."
- Long / Short - Will the asset go up or down?
- Smart Human Theory - Invest in a person (e.g. Warren Buffet or Cramer or …)
- Leverage - Multiply the effects of your investment
- Gamble & Speculation
- Tax-efficient - Investing in ways that limit tax burden
- Fee-efficient - Investing in ways that limit fees paid in investing
- Discounted Assets - e.g. Invest in stocks that provide bonus shares when you reinvest, underlying assets are worth more. e.g. NAV above price.
- Arbitrage
- All in X, excluding {split by category} - Example: Asia minus Japan. Example:
- Buy Ford, short all other autos to gain the value Ford itself gains, while ignoring the auto industry's results.
- Beta/Risk
- Gain Alpha - Maybe more of a goal than a strategy
- Momentum
- Speed - Algorithms - http://www.youtube.com/watch?time_conti ... 43a-KxLFcg
- Quantitative Analysis and Machine Learning
- Diversification & Hedging
- Diversified Portfolio (e.g. Lots of eggs and/or baskets)
- Concentrated Portfolio (e.g. Watch those eggs closely)
- Information based
- News, Rumor vs News (e.g. Early vs Late responses)
- Macro
- Fundamentals
- Technical Analysis - Trends
- Management Analysis
- Illegal Strategies… Not listed.
- Market Maker
- Bounds Trading - e.g. Stop loss
- Protect against inflation
- Market
- Sector / Industry
- Value - using P/B, P/E, etc.
- Growth - using P/B, P/E, etc.
- Market-Cap
- Nation
- Region
- Weather
- Dividend