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Taking Your Investments to the Next Level

taking investments to a higher levelWhen you’re a beginner investor, you need to keep your investments simple. The last thing you need to do is worry about picking individual stocks. You need to focus on options like an index fund or some other low-fee fund. This one investment provides you with immediate diversification. You don’t have to worry about having five or six figures to invest. You don’t have to worry about picking dozens of different investments. You can start with as little as $1,000 and be fully diversified through one investment.

There are plenty of investors that are perfectly happy following this investment strategy for the rest of their life. They only worry about tracking fund performance and making sure that they have adequately allocated their portfolio across diverse asset classes. Beyond this, they let the professional fund managers deal with the details.

Some investors, however, prefer to take a more hands-on approach. As you accumulate more capital and experience, it doesn’t hurt to branch out on your own and begin choosing individual stocks or bonds; however, once you take this step, the information available can quickly become overwhelming. There are approximately 5,000 companies actively traded on the major U.S. exchanges and as many as 100,000 worldwide.

As a single individual, it’s impossible analyze even a fraction of these companies. You need some form of guidance to narrow your options.

Taking Your Lead From Top Traders

One of the simplest ways to narrow your investment choices is to select from investments that have already been chosen by successful investors. Pick any successful hedge fund and find the list of their active positions. The investments on this list are what have given them the performance that makes them a successful hedge fund. It sounds simplistic when you put it that way, but it’s true. It’s like a behind the scenes look at the portfolio of a successful investor.

Let’s look at Calamos Growth A (CVGRX) as an example. The fund has a 20-year return of over 14%. They have a long, successful track record. You can see that they have positions in 85 companies with Apple, Cerner, Google, Facebook and Mastercard making up the top 5. This didn’t happen by accident. A firm with this long of a track record follows rigorous methods when choosing an investment. These 5 companies would be great candidates for your own portfolio. By repeating this process across multiple funds, you will have an excellent short list from which to chose your actual investments.

You don’t have to limit yourself to public funds either. There is a lot of information you can glean from private equity firms.Take, for example, Shailesh Dash Al Masah Capital. Al Masah Capital is one of the largest private equity firms in the middle east. Shailesh Dash, CEO has managed billions of dollars in investments over his career. Anyone with transaction volumes in the billions with an IRR of 49% should be paid attention to. 

Now, there’s no particular reason to single this one company out. It’s just an example. There are dozens of private equity firms that do the same thing. There are billions of dollars in private equity. Many of these firms are incredibly successful. While you can’t see the individual holdings of a private equity firm, there’s still a lot to be learned from studying the areas and types of investments that they are involved in. 

Don’t Get Complacent

When moving beyond mutual funds to individual stocks, you have to remain diligent. You cannot get complacent in your investing. If you fail to consistently monitor the performance of your portfolio, a losing stock can have a significant negative impact on your overall returns. That’s not to say that monitoring your portfolio needs to be a full-time job, but you do have to remain vigilant.  

There’s nothing wrong with mutual funds, but if you do desire to invest in individual stocks and bonds, don’t choose blindly. Follow the lead of top investors to build a short list. Analyze the positions on this list to pick the winners for your own portfolio. That’s how to take investing to the next level.

 Image: Freedigitalphotos.net/Miles

About Kim Parr

Kim Parr is a private practice optometrist, freelance writer, and personal financial blogger. You can follow her journey to 20/20 financial vision at Eyes on the Dollar.


  1. I made the switch from mutual fund investing to individual stock investing during the Great Recession, when I lost all faith in the abilities of mutual fund managers. I chose to focus on dividend investing. After careful analysis, I built a portfolio of 16 to 24 approximately equal-weighted dividend-paying stocks. And I’ve never had a reason yet to regret my decision.

    You are right in pointing out that there is more work to individual stock investing. The monitoring, not of stock prices but of company news and financial changes, is essential to be able to sidestep bad stuff and take advantage of good stuff. That process takes me an average of 12 hours a week or so. But putting in that time has been worth it to me when I consider how that work has increased the income I derive from my stock portfolio.

    Combined with frugal living, that income from my portfolio is now enough to cover 200% of my basic living expenses. Which certainly works for me. 😀

  2. I started with individual stocks then transferred into mutual stocks later on. I can’t handle the emotions when my stocks take a plunge so I took to a less risky one!

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