“We must learn our limits. We are all something, but none of us are everything.” — Blaise Pascal
From the outset the Hybrid Investor is very similar to the Passive Investor. You leverage the power of Index Funds. Where the two differ is that you are actively pursuing an investment education with the Hybrid approach: teaching yourself finance and business basics, developing a multitude of mental models, devouring countless books and business news. The purpose being to eventually practice a combination of Passive and Enterprising investment; hence the Hybrid Investor.
However, it is of extreme importance you are true to yourself while pursuing the Hybrid approach, due to the Lake Wobegon effect. You will hit a point, during your investment studies, where you will get it, or not get it, just like in Calculus class; but without ∂’s. It is important you catch this, because profiting from individual stock investments over long periods of time is not easily achieved, and a poor understanding of the fundamentals that go into successful enterprising investing, will prove detrimental to your wealth. So when you find yourself not grasping the gist of what you’ve been studying either: 1. Give it more time and more effort or 2. Stick with Passive investing.
So the formula works out like this: as you become more adept at business analysis you slow your investment in Index funds and start placing big dollars in the stock of companies you find to be intelligent investments; that is, those which provide an adequate margin of safety and possess favorable business prospects (all of this is to be covered in immense detail in upcoming blog posts).
- Have the option to spend minimal time managing your investments
- The option to guarantee yourself average market returns
- Has the potential to outperform the market
- Potential for large gains
- Requires time to hone a strong investment aptitude
- Has the potential to never outperform the market
- Has the potential to underperform the market
- Potential for large losses
