About The Company:
The Practical Investor was founded in 1999 as the financial services industry was maturing into what we are all familiar with today. As a means to stay ahead of the crowd, Tony Cherniawski began to develop a money management system to fill the void left by investment companies and mutual funds that were rather one-dimensional in their approach.
Early Methodologies:
The first methodology adopted by Tony was to pore over Morningstar Reports to find the best mutual funds (Alpha) with the lowest risk (Beta). From that research he put together a list of the “best of the best” money managers in each asset class. This provided market-beating performance in bull markets, but provided only minimal protection in bear markets.
During the 90s, Tony noticed that many of the most successful money managers (Peter Lynch, Sir John Templeton and Michael Price, among others) began retiring early. Many of them were on schedule to be “out of the business” by 2000. Why? The common theme among many of those managers was their management agreements required them to be “in the market” at all times. Cash was not an option, even in a bear market. They saw something coming that almost no one else was ready for…a multi-year bear market.
Thinking Outside The Box:
The fact is, most money managers are subject to linear thinking. As an example, A manager may study the fundamental nature (cash flow, profitability, product lines, competition) of a company before buying it. What he may not know is, as he is pulling the trigger to buy that stock, the market may have already priced those fundamentals in. So most managers are not ahead of the crowd, getting the best value for their clients’ money, they are just echoing what the market already knows. This may be compared to driving a car while looking through the rearview mirror.
Most investors are also guilty of making the same mistake. They often cautiously watch the price of a stock or mutual fund rising then throw caution to the wind when a buying panic occurs. They forget the truism’ “Buy low and sell high.”
Send us an email or give us a call at 517.331.5200.