Seth Klarman is one of the best investors in the world, but he rarely gets mentioned in the media. This is most likely because he doesn't seek publicity... He's the rare investment manager who isn't worried about gathering more money to manage.
Many of the investment managers I talk to complain that they spend too little time managing money. They spend more time managing people who work for them and trying to get more money to manage. It's a tough business, and increasing assets under management is the quickest way to increase revenue.
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Klarman doesn't care about increasing the assets he manages. In fact, he's reducing the amount of money he has under management.
His firm, Baupost Group, is believed to have had about $30 billion in assets under management at the end of last year. He's been having trouble finding stocks he likes and is returning capital to investors. The firm is very secretive, so we don't know how much money he plans to return.
According to CNBC, Klarman's fund is believed to have delivered an average annual return of 16.4% over more than 30 years. He has created more than $22.6 billion in net profit for his clients.
While Klarman is not seeking attention, he has spoken a few times about his philosophy and has written a book, "Margin of Safety." Used copies are available on Amazon for hundreds of dollars.
Event without buying the book, you can guess what Klarman's big focus is just from looking at the title -- safety. In fact, safety tops the list of principles he shared in a public talk in 1987. Specifically, Klarman advised investment managers to focus on risk before they focus on returns. "A lot of it is focusing on multiple scenarios, what can go wrong? How much can you lose?"
He also focuses on individual stocks. He believes many managers take a macro-view of the markets and worry about what the Fed will do or how OPEC's production cuts will affect earnings of companies in the S&P 500. Klarman noted, "My view is that is incredibly difficult to do. I don't know anybody with a really good long-term demonstrated record of success of macro forecasting."
Finally, he talked about trying to make money on every single investment rather than beating the market.
I have never understood why investors focus on index funds as the ideal long-term investment. They don't say it, but index funds are designed to deliver 100% of the losses in a bear market. That, to me, seems like a dangerous investment. Klarman agrees.
As he said, "If you're focused on absolute returns, the idea of losing people's money becomes fairly abhorrent. ... Your goal is not to lose less, your goal is to try to make money all the time, protect capital on the downside and still do well enough on the upside."
Now, I know I'm no Seth Klarman, but we do have one important thing in common: I also focus on safety and individual investment ideas. My goal is to make money on all of my trades... not just lose less than the market averages when stocks sell off.
That's why I spent years developing the indicator my premium readers and I use for our income trades. While most well-known technical indicators are accurate only slightly more than 50% of the time, my ITV (short for Income Trader Volatility) Indicator, on the other hand, is accurate 93% of the time.
That's a huge advantage.
With today's climate of economic uncertainty and global unrest, we need the best tools available to ensure a high, sustainable income... no matter what happens on Capitol Hill, to the economy, or to the American dollar.
And with the ITV indicator's help, I believe we can do just that. Thanks to the ITV, my readers and I can identify stocks with the least amount of unpredictable risk and the highest probability of success. It's how my readers and I generate an incredible weekly income, often reaching into tens of thousands of dollars.
And best of all: To make this money, we don't have to worry which way the stock market will go.
So how do I use the ITV Indicator to accomplish this ideal strategy?
Well, it all has to do with a certain type of investment I'm sure you've heard of... but may not be aware you can use this way. You see, I'm talking about "options."
Now, if you've shied away from options because you've heard they're risky, I don't blame you. The way most people use options is risky. But my strategy is different. That's because I don't use options the way most people do, which is by buying an option, and hoping the price goes up.
Instead, I sell options. Put options to be exact.
For those who aren't familiar, selling a put option means you agree to buy a stock at a predetermined price from the buyer. In return, you pocket what's called a "premium" upfront. My Income Trader readers and I call this "instant income" -- because that's exactly what it is.
At worst, I'll have to buy a stock I already liked at a discounted price. At best (and 93% of the time), I collect my instant income and move on. And if I want, I can keep making similar trades month after month, pocketing instant income each and every time.
This fits my style perfectly, because as I mentioned earlier, I hate taking risks.
All I want is a steady, reliable income. And this was the best way I found to do that. When I use this strategy, I'm simply taking advantage of the speculators who are wagering what the stock will do next. I'm collecting the money from them. And I’m doing all of it thanks to my ITV Indicator. I'm using the indicator to pick situations where speculators are betting that a stock will keep going in one direction when my indicator tells me otherwise.
Bottom line, I think it's time for investors to start thinking differently about their portfolio. It's also time for investors to start thinking differently about risk.
Instead of trying to forecast the next macro-economic event, focus on making each individual trade you make a winner. And instead of being content to merely buy and sell stocks and trying in vain to "beat the market" -- start thinking about risk and generating income. Seth Klarman has been saying this for years. My Income Trader readers and I couldn't agree more.
If you are one of those people who are interested in generating additional income... or in boosting your income to a whole new level, I can help you get started today. I've put together a special report that tells you everything you need to know about my ITV indicator and how put options can help you generate thousands of dollars in additional income each month -- without taking on unnecessary risk. To see that report, simply click here.
This article originally appeared on StreetAuthority.