The Get Smart in 60 seconds series is designed to be like an espresso shot, a concentrated article dedicated to the Smart Investor on the go, with ideas or concepts delivered in 250 words or less.
Michael Steinhardt is not a well-known investor.
But he is almost legendary in the hedge-fund arena.
More than that, he has a peculiar tactic when it comes to investing.
Sell everything
From time to time, Steinhardt would liquidate all his stock positions.
In an instant, he would start with a clean sheet. He said that it felt refreshing to rebuild a portfolio from scratch, free from wishy-washy legacy holdings.
His strategy is, no doubt, controversial.
Selling all your stocks today would be tantamount to admitting to failure.
A method to the madness
As stock markets fall around us, it can be difficult to keep our focus.
With the abundance of stock bargains around us, we will be hard-pressed to make the right choices.
By thinking through — but not necessarily doing — what Steinhardt suggests, we can free ourselves from our past decisions and errors.
Instead, we look at the stock market as if we are looking at it for the first time.
Which stock would you choose if you were starting out today?
How much would you buy?
And most importantly …
… does your current stock portfolio reflect what you would have bought if you started again?
If it doesn’t, you might want to rethink how you are making your buy decisions.
As Warren Buffett once said: The stock market is there to serve you, not instruct you.
Buy what you want to own, and not what the stock market is telling you to buy.
