Chris’ note: Last year, colleague Teeka Tiwari locked in a 51% overall return in our Palm Beach Letter advisory’s model portfolio. That’s about double the S&P 500’s 2021 return.
He did this by seeing the truth behind three myths most investors fall for. Once you see it too, you can crush the market’s returns. So pay attention below as Teeka clears up these myths and shares an opportunity his team has found to get $1.25 shares in a company with the potential for triple-digit returns.
Most investors do worse than the broad market indexes year in and year out.
That includes everyday investors. But it also includes actively managed mutual funds and even some of the world’s biggest hedge funds.
These aren’t all stupid people.
So why do they constantly get bad results?
It’s not their fault. They’ve heard so many myths… for so long… they don’t see what’s right before their eyes.
Most of the people spreading these myths believe them, too. But today, I’m dispelling the three biggest investing myths so you stop falling for them.
You’ll soon see why we believe we’ll continue outperforming 99.9% of the world’s investors this year and beyond.
In 2021, my Palm Beach Letter model portfolio finished up 51%. The S&P 500 was up just 27%.
And since I took over the advisory in June 2016, our recommendations have posted an average annual return of nearly 34%. In the same span, the S&P 500 has logged an average annual return of 15%.
That’s right… On average over the past nearly six years, our portfolio has beaten the overall market by more than double per year.
How do we continue to crush the market like this? Asset allocation.
Asset allocation is a fancy term for dividing your portfolio among different types of investments.
If you talked to any reputable financial adviser, it would come up right away. They’d probably tell you it’s the top influence on how much money you’ll make from your investments over your lifetime.
That much is true.
Studies show that roughly 90% of your overall returns come from asset allocation… NOT the individual investments you select.
Think about someone who holds only cash over 40 or 50 years. They’ll lose buying power as inflation and most other assets run higher. Then the advisor will almost certainly discuss rules for dividing your portfolio between stocks and bonds.
The classic formula is the 60/40 portfolio – a mix of 60% stocks and 40% bonds.
But stocks and bonds aren’t the only asset classes out there. They’re just the ones most Wall Street people understand best. And the ones they’re paid to promote.
Meanwhile, there are vast opportunities in alternative assets: Private businesses (more on these in a bit)… gold, silver, and other commodities… real estate… collectibles…
And of course, cryptos.
The person who sticks to just stocks and bonds is like someone eating meat and potatoes for every meal.
It’s not only boring… it’s risky.
When you limit yourself to stocks and bonds, you’re limited to how well those two categories perform over any given time.
And history shows that the classic 60/40 portfolio returns 6.2% a year. That type of result won’t change your life. It’ll barely keep your head above water.
Most investors know that and want more. But when they limit themselves to stocks and bonds, there’s only one way to try for better returns…
The investors I just mentioned put too much of their money into a small number of investments. Often, they pile into extremely speculative stocks.
Very few find success. And when they get it wrong – even just the timing – they lose big.
These aren’t just individual investors. They’re professionals, too.
From January to November 2021, hedge funds gained around 9% on average, according to data from HFR. That’s far below the 24% return the S&P 500 had over the same period.
These failures prove that improper asset allocation can blow up even the most sophisticated strategies.
As I said before, Wall Street makes most of its money pushing people into stocks and bonds.
If you go into an adviser’s office to talk, you’ll pay good money to get your (flawed) asset allocation plan.
Then you’ll pay more money to buy and hold the stock and bond recommendations – through commissions, fees, and other hidden costs.
If you want to try to do better than the markets, you’ll pay even more. Actively managed funds charge higher fees than index funds, even though more than 80% don’t beat the market any given year.
In fact, over the last 15 years, 92% of all active large-cap stock funds did worse than the S&P 500.
Meanwhile, hedge funds typically take 2% of your money every year just for letting you take part. If they make money with your capital, they’ll take 20% of the profits, too.
They justify this with the idea that better performance costs more.
But that’s false.
Every one of Wall Street’s fees and commissions reduces the subpar gains you can expect.
That means you automatically start with a negative return.
So when you buy into the standard Wall Street myths:
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You severely limit your investment choices.
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This causes you to take much bigger risks.
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You further hurt your performance by paying more for worse results.
I don’t expect this to change on a large scale. Wall Street pushes these ideas too forcefully on people. But the fact that you’re here with us shows that you’ve already started to break the vicious cycle.
That’s because at Legacy Research, we do the opposite of what Wall Street preaches.
And we don’t just do better than the markets. We crush them.
As I mentioned, alternative assets are key to proper asset allocation.
And with all the volatility we’re seeing in the public markets, it’s a perfect time to get exposure to one of our favorite non-crypto alternatives: private companies, or what I call “pre-IPOs.” (An IPO, or initial public offering, is when a company lists on a public exchange.)
My team has come across a company that’s found a way to produce oil cheaper than anywhere else in the world.
More importantly, we believe it could help the U.S. replace oil imports from Russia.
After vetting this private company… a Wall Street powerhouse recently wrote a check to become the largest shareholder.
This firm’s deals have been some of the most profitable opportunities of the past 150 years… including returns of 47x, 100x, and 159x.
But this time, you can get a seat at the table.
That’s why tomorrow at 8 p.m., I’m holding my first-ever U.S. Energy Independence Summit.
In this special briefing, I’ll tell you the company… the tech it’s using to make low-cost energy… and the Wall Street powerhouse backing it.
Best of all, I’ll reveal how you can get shares for just $1.25 each. You don’t need to be an accredited investor. But as with all private deals, shares are strictly limited.
Click here to reserve your spot.
Let the Game Come to You!
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Teeka Tiwari
Editor, Palm Beach Letter