Imagine if you only worked one day in a year and your portfolio outperformed most fund managers. Think of the time you could be spending with your loved ones instead.
Eddy Elfenbein does that with his stock portfolio.
You might not know who he is — but today, I am inviting you to get to know him.
Since 2006, Elfenbein’s portfolio has gained over 210%, comfortably ahead of the S&P 500’s 164% total gain. His track record is exemplary. That’s because it is widely acknowledged that the vast majority of US fund managers regularly fail to beat the S&P 500’s returns.
But his results are not the only thing that caught my eye.
The most interesting thing is HOW he achieved his returns. The elements of his investment process resonate deeply with what I believe — and that is what I want to share with you today.
Are you an active and passive investor?
According to a recent CNBC report, 85% of US fund managers are trailing the S&P 500’s returns over the past 10 years.
As a result, index funds, which mimics the holdings of a particular stock market index, is rising in popularity. This approach is now commonly known as passive investing.
However, I would argue that buying a passive fund alone does not make you a passive investor. If you are active in moving your money in and out of an index fund, you are likely to end up with the same underwhelming results of the active fund manager.
In contrast, what Elfenbein does is often referred to as active investing.
It’s not an unfair label. Every year, on his Crossing Wall Street blog, he actively chooses a list of 25 stocks that he would buy.
But what sets Elfenbein apart from the regular active fund manager is that he sets aside a single day to buy all 25 stocks, and thereafter, leaves his portfolio untouched for the rest of the year. In other words, he is not actively buying or selling any stock throughout the year.
In my book, Elfenbein’s investment approach is better described as passive, rather than active. His 13-year track record certainly validates his process.
Will the real passive investor please stand up?
Elfenbein calls his approach the 1-Day A Year Work Week Investor.
It’s an appealing idea for several reasons.
For one, investing can provide you with the financial means to choose how you want to lead your life. By doing nothing for the whole year — save for that one single day of buying — your time can be spent on the things that matter the most to you.
Elfenbein also sets a fixed date, the first of January every year, to perform his stock buys.
In effect, what he has achieved in the last 13 years did not involve any market timing. his results clearly demonstrate that timing your entry does not matter.
Get Smart: Keep it simple but effective
Elfenbein’s results vindicate my belief that investing does not have to be complicated.
His investing discipline is as straight forward as it can be. He does not spend any time deciding whether markets are high or low. Instead, he has set a fixed date for every year over the last 13 years and bought accordingly.
Most importantly, it’s an investment process that anyone, including yourself, can easily follow.
His 13-year live demonstration of how to invest is a role model for everyone who wants to become a better investor: Be passive in your investing actions and keep it simple.
And most of all, free up your time to spend with your loved ones.
P.S. Eddy Elfenbein’s blog can be found here.
None of the information in this article can be constituted as financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life.