ETFs – or exchange-traded funds – have exploded in popularity in recent years. They’re easy to invest in, give you instant diversification, and can be highly focused.
Diversification is smart. It’s very important to not put too much of your money in any one stock. At the same time, you don’t want to put your money in bad stocks – and that’s what can happen with an ETF. You are forced to buy every single stock in that ETF. And at that point, it becomes over-diversification. You’re stuck owning all of the laggards that will inevitably weigh on your returns.
There’s a better way to invest when dealing with early stage trends. We create our own ETFs, focusing only on the strongest companies within the trends and avoiding those that will hold back our overall profits. My exhaustive research and analysis is designed to point us to the companies best positioned to become big winners, so we’re better off buying a basket of the top three or four companies. We still spread out our risk, but we increase the likelihood that we’ll get at least one home run out of the deal – and perhaps even more.