Rachel’s note: This week at the Dispatch, we’re introducing a new contributor…
His name is Kris Sayce… and he’s an industry veteran.
Kris began his career in finance in London more than 25 years ago… But when he discovered financial newsletters in 2005, he knew he found the path he liked best…
And that’s helping everyday investors grow and protect their wealth.
Since entering the industry, he has spent years writing about small-caps, tech stocks, emerging markets, and macroeconomics in publications like Daily Reckoning, Revolutionary Tech Investor, and New Frontier Investor.
And now, he’s going to share his expertise in the markets with us at the Dispatch.
For his first issue, he’ll walk you through Casey Research founder Doug Casey’s “10 x 10” Approach to investing… to find out if your portfolio will thrive under any market conditions.
By Kris Sayce, editor, Casey Daily Dispatch
The “10 x 10” Approach.
You couldn’t get a simpler way to invest.
Effective too.
So what is it?
And what makes it such a great way to invest?
We’ll explain it all below.
Including how you can start making it work for you right away…
Whether you’re new to the Dispatch or you’re a long-time reader, thank you for tuning in to today’s edition.
In the Dispatch, our goal is two-fold:
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To introduce you to the most important investing themes of the day, and
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To show you how to profit from them.
We do this by drawing on the ideas of our in-house investing experts: Dave Forest, Nick Giambruno, and the founder of our business, Doug Casey.
Naturally, it’s from Doug Casey himself that we get the “10 x 10” Approach…
A Simple, Three-Step Way to Invest
First, you take your investible capital and split it into 10 lots. Let’s say you have $50,000 either in investments or standing by ready to invest.
That means allocating $5,000 to each lot.
Next, you look for 10 separate investment ideas that have relatively little in common. Now, that isn’t always as easy as it first seems – it takes some thinking. (Guess what? We’re here to help with that!)
Finally, look for investments that have the potential to earn you 1,000% returns over a business cycle. (For ease of understanding, think of a business cycle as the period between one stock market bottom and the next. Although it’s a little more nuanced than that.)
The reason for picking 1,000% gainers, or 10-to-1 shots (or 10-baggers), is that you only need one or two of your 10 investment ideas to pay off in a big way.
The rest may produce no more than average returns. Some may fail to take off entirely – potentially leading to losses. But even if only one of your 10-to-1 shots pays off, it will more than make up for any losses on your other investments.
One thing to note. Many people assume this means that every investment you make is a high-risk speculation or even straight-up gambling. That’s not true.
Don’t mistake making big returns for the riskiness of an investment idea. Risk is only part of the equation when it comes to measuring potential returns.
There’s also time.
Are you buying the investment at the peak or bottom of a business or stock market cycle?
And how much time do you expect to wait for the investment to play out? Some ideas may take 10 years, due to a longer business cycle or slower growth.
Others may take only a few months to play out – especially if the idea is hot and you’re lucky enough to get in at just the right time.
Do This Simple Exercise With Your Investments Now
We’ll get into a few more details of how it works in coming issues of the Dispatch. But for now, here’s a summary of the simple, three-step process…
Step 1: Take your total investible assets.
Step 2: Split it into 10 equal lots.
Step 3: Invest into 10 mostly unrelated investment ideas.
Now let’s put this into practice.
Your first step is to do a breakdown of your investments as they stand right now.
Take a piece of paper or create a spreadsheet with 11 columns.
In the first column, write all your current investments. Depending on how you have things set up right now, it may be a long list.
Next, starting at the top, you’ll move each investment into one of the other 10 columns.
If your next investment is similar to the first one, put it in the same column.
If it’s different, put it in a separate column.
Work your way down the list.
Do You Have 10 Perfect Columns?
At the end, you’ll have several columns with your investments grouped under each. See how it looks. If you have 10 perfect columns, it likely means you’re well-diversified.
If you only filled a few of the 10 columns, it may mean you’re under-diversified. And if you had to create extra columns, it may mean you’re over-diversified.
Why is that bad? Well, for example, if you’re under-diversified… a plunge in one of the sectors you’re invested in could cause outsized losses for your portfolio. Can you afford that? Many can’t.
And if you’ve got 20 or 30 investment ideas… how can you stay on top of them all? You’ll likely miss crucial news or data that also affects your portfolio.
But however it looks, you’ll have a great visual snapshot of your investments.
Now that we’ve laid the groundwork, the next part of the exercise is to work out what to do with what you’ve learned from Doug Casey’s “10 x 10” Approach.
We’ll look at that in tomorrow’s Dispatch.
Tune in then.
Cheers,
Kris Sayce
Editor, Casey Daily Dispatch