My dad always said, the best coaches pick their defenders first. When I was younger I thought: "How boring?" But it makes sense.
The most rewarding things in life take time. You need to work out how to stop conceding goals before you score them.
An unbeatable strategy
Whether it's coaching a game of soccer or investing your life savings, a winning strategy takes time. Time can fly when you're having fun, or feel like an eternity when you're losing, but as long as you've got the basics down and your patient, the rest will fall into place.
To be more specific, in investing, we need to build our portfolio upon a solid foundation. A group of assets which we can rely upon in times of need. At current prices stocks like Telstra Corporation Ltd (ASX: TLS) and Challenger Ltd (ASX: CGF) spring to mind.
Forget diversification
Diversifying for the sake of diversification is wrong. It's not a winning strategy by itself. Imagine if a coach had no idea of the skills that his players possessed. That coach would send out as many players as they could rather than honing their players' ability and focusing on just a dozen or so. In investing, having half as many winners is better than having twice as many losers.
To find a balance you need midfielders who make up the bulk of a winning strategy. They'd be good, rounded players which can do more than just defend. They can attack, move sideways and are generally the players which do most of the hard work, but can be easily overlooked. Slater & Gordon Limited (ASX: SGH) and Transurban Group (ASX: TCL) are two stocks which could be considered 'midfielders' in your portfolio.
"The loudest one in the room is usually the weakest" – Denzel Washington, American Gangster.
The final spot your players should fill (in order of importance) is the forward positions or in soccer, the strikers. The flashy strikers are – for lack of a better word – the weakest on the field. They're the ones who are most likely to dive and prance around the ball, trying to evade the defenders and put on a dramatic display if they fail.
There's a reason successful soccer teams only have one or two strikers – they can be extremely costly and fragile.
In investing, limiting your speculative or high-risk investments is important. They're usually either all or nothing. The most important thing is making them fit into your overall investment strategy. For example, Liquefied Natural Gas Limited (ASX: LNG) is a high-risk gas explorer with heaps of potential but, it's also a high-risk gas explorer with heaps of potential only.
Foolish takeaway
Making the most of your time is important. But there are no get rich quick schemes. Building your team of companies from the ground-up takes time and loads of patience. Don't be afraid if your strategy suffers set-backs, all you've got to do is follow the basics – thereby putting the chances of success in your favour.
