Seeking investment insight

There is no shortage of proposed insight when it comes to investment success. Some people think it comes from knowing people. Others think it comes from hard work. Although those things are true, in and of themselves, they don’t constitute a formula for investing. You need more. Let’s take a closer look at what you should seek to reach your investment goals.

Larry Sarbit is CEO and CIO of Winnipeg-based Sarbit Advisory Services and is the sub-advisor on three funds for IA Clarington. In an article he has written for the Financial Post, Sarbit provides some insight into what constitutes a formula for investment success, and he does so by plucking some established wisdom from one of the most famous investors of all time, Warren Buffett.

Investing is like fishing

Well, actually, Sarbit’s first insight comes directly from Charlie Munger, vice chairman of the conglomerate headed by Warren Buffett, Berkshire Hathaway. Recently, Munger said that the first rule of fishing is to go where the fish are and that the second rule of fishing is to follow rule number one.

According to Sarbit, Munger used the example of China to make his point. Specifically, Munger spoke of a successful Chinese investor, Li Lu, who did very well by investing in China, which, metaphorically speaking, is where all the fishes are, from an investment standpoint. In other words, you need to find investments in places that haven’t been depleted of fish.

The circle of competence

Which brings us to another bit of Warren Buffet Wisdom that Sarbit points to, which is to stay within one’s own circle of competence, and Sarbit again used China as an example. He says he would never venture alone in China as an investor because he doesn’t know the language, the culture, or the type of governance to expect. Instead, Sarbit prefers to stay in places he’s familiar with, or partner with people abroad who actually know the domestic landscape.

In other words, Buffett, Munger and Sarbit are all preaching what we’ve been preaching here, too, which is to invest in places where other people aren’t, and to do so with either your own personal knowledge, or that of people you can partner with for long-term investment success.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.


When private investing is the better option

People invest for a number of reasons. Some want to put their money to good use, instead of simply spending it or having it sit in a low-interest bank account. Others want to preserve their capital with the aim of having a comfortable income over time.

However, if you look at some of the history of investing, and your goal is to incur substantial growth with your investments, then perhaps another approach should be considered. Specifically, private investing offers the type of substantial return that one won’t necessarily find with more conventional forms of public investing, such as your typical stocks, bonds, etc.

A custom-made approach

So, why is private investing a potentially more lucrative option for investors willing to take some manageable risks with their capital? The simple answer is that, although private investing takes more time and research, the information gained from such efforts allows the private investor to know his or her investment opportunities better and, as a result, focus on those opportunities that are seen as being more rewarding long-term.

custom private investing

To use a real-world example, private equity is similar to making a custom-built high-end product, versus something that is bought off the assembly line. Think about it for a moment. If you want, let’s say, the best racing car in the world, would you buy one of thousands made in a factory, or one custom-built in a custom shop by a custom designer presiding over a custom-picked staff and personnel?

The answers seems pretty easy, doesn’t it. If you want the best, you get the best custom solution, even if it initially costs a little more, and you have to wait for it a bit longer. In the end, you’ll get rewarded with quality, and get your money’s worth, too.

Well, the same holds true with the potential of private investing, versus traditional public equity. With private investing, you, or experts working on your behalf, take the time to learn what the best private investments are, which generally aren’t available to the public, and experience the rewards of such custom-made investment strategies. It only makes sense, doesn’t it?

A history of success

And, if you look who historically has benefited most in terms of investing history, private investors, using a strategy of private investing, have fared rather well. Warren Buffett has made a fortune investing in private companies. As have other forward-looking investors who took the time to seek higher-yield investment opportunities, versus some of the cookie-cutter options available to everyone on the stock market.

In addition, private investing can also add something else to an investor’s portfolio: diversification. For example, even though Warren Buffett certainly made much of his fortune in private companies, he’s also been a disciple of investing in the stock market. Of course, what such a diversified approach and portfolio provide an investor is protection from performance failure in once class of investments versus the other.

Therefore, when considering your options as an investor willing to take on some risk to achieve capital growth, private investing is something that has a track record of success, while at the same time providing that always sought-after diversity that is a component of many cherished investment portfolios.

ASCEND GRP is an asset-management firm, with offices in Toronto, Richmond Hill, and New York, that services clients seeking investment opportunities worldwide.

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