Blue Ocean Investment Strategies - 10 Reasons Why Everyone Should Utilize the Long Tail of Investing
Defined within the realm of the statistical Bell Curve, the long tail would reside in the skinny tail at the borders. The long tail, in regards to goods and services, refers to the evolution away from mainstream offerings towards more niche products and services. With the internet drastically reducing the costs of establishing distribution channels, the ability of entrepreneurs to focus more on the longtail sector to fit their customized needs is gaining increasing appeal.
However, almost no one speaks of the longtail of investing. To me, longtail investment strategies are the strategies that do not heavily rely on fundamental or technical analysis, but exploit other strongly predictive factors to produce not only superior returns to traditional investment strategies but also investment opportunities with far better risk-reward paradigms than those produced by traditional investment strategies. Here are 10 reasons why the longtail of investing is the only way to build wealth.
(1) You will never achieve the level of wealth you desire by handing your money over to a large investment firm. The vast majority of private investors hand their money to large institutions and allow them to invest their money for them. If this were truly the best way to achieve financial freedom, then almost every one you know would be ecstatic with their financial consultant. Think of how many people you know that absolutely rave about their financial consultant.
The fact that 90% of people you know do not rave about their financial consultant should tell you that niche investment strategies, or longtail investment strategies, are far superior. The ones that are happy with the large investment houses already were independently wealthy before they sought out their help. Think about how many people you know that have ever told you, "I wasn't wealthy before, but thanks to my investment firm, I am wealthy beyond my dreams now."
(2) Thanks to evolving information technology, there are many other means of making investment decisions than just utilizing fundamental and technical analysis. Though people have been really slow to grasp this, once they do, longtail investment strategies, like those invented by SmartKnowledgeU(TM), will boom. There is no doubt that the level of top-notch financial, political and corporate information available to the average investor has increased by leaps and bounds within the past decade.
There is a virtual treasure map that was created by the flattening of the world over the past decade to selecting stocks that are poised to explode. However, because the largest, most powerful investment institutions in the world have kept the masses of investors fixated on traditional investment techniques such as value and fundamental analysis, the longtail of investment strategies is currently much further behind in its developmental phases than it should be.
The best analogy I can use when explaining why people have ignored the long tail of investment strategies is to compare it to the incredibly slow adoption of Internet Protocol Version 6 (Ipv6) by the United States. When China started preparing its country for Ipv6 a decade ago, the benefits in increased security and its added value properties in e-commerce were evident even back then. However, people in the U.S. were comfortable with the lesser Ipv4 so did not take any action until the progress and superior internet and business capabilities of China, Korea, Taiwan, and Hong Kong finally embarrassed the U.S. enough to move forward and catch up with Asia.
I see the same thing happening in the educational realm of investing. Everyone is comfortable with the traditional investment strategies that have been propagated for the last several decades so nobody sees a need to move forward even though much better strategies exist today. Just as with Ipv6, the world will eventually realize that the safest and best means of investing money reside in the longtail, and they will eventually adopt these strategies.
(3) With so much investor skepticism of corporate integrity sparked by past accounting scandals at Enron, WorldCom, General Motors and the like, and the current, ongoing backdating option scandals, investors will increasingly seek alternate means of making investment decisions other than crunching numbers that they feel are untrustworthy. Furthermore, technical analysis often yields false positives as well. A chart will show indexes that appear bullish having just broken through a ceiling of resistance only to have the index turn back downward for a prolonged period of time, or a chart will appear bearish having just broken through a floor of resistance only to turn around and begin another bullish ascent.
In fact, you have seen some of these turnaround trends with some of the technical posts that I've placed on my blog in previous months. In fact, that is why I always state that I never rely solely on technical indicators to make my decisions. I rely only on technical indicators to confirm or dispel what my long tail investment strategies tell me. Of the three types of analysis, fundamental, technical and long tail, long tail investment strategies yield by far the least amount of false negatives and false positives. That's why I rely on them so heavily.
This sentiment will lead to an evolution of longtail investment strategies, and the discovery of more efficient and better predictive means of making investment decisions than even those that already exist. Even current longtail investment strategies, such as those utilized at SmartKnowledgeU(TM) are constantly evolving as access to reliable information increases every year. Making decisions as if you were a fly on the wall of boardrooms is no longer a fantasy. It is possible, thanks to the evolution of the information landscape.
(4) With the growth of blogs and pure information sites on the web, the stranglehold of global investment myths, including the Modern Portfolio Theory of diversification, will soon be exposed for what they are - cleverly disguised sales strategies posing as investment strategies. Once people realize this, longtail investment strategies will gain wider acceptance, much like acupuncture and herbal medicine eventually gained credibility as healing regimens in the schools of Western medicine.
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