Defined within the realm of the statistical bell curve, the long tail would reside in the thin tail at the edges. The long tail, when it comes to goods and services, refers to the evolution away from mainstream offerings towards more specialized products and services. With the Internet dramatically lowering the costs of establishing distribution channels, the ability for entrepreneurs to focus more on the long-tail sector to meet their personalized needs is becoming increasingly attractive.
However, hardly anyone talks about the long tail of investing. To me, long-tail investment strategies are the strategies that do not rely heavily on fundamental or technical analysis, but instead exploit other strongly predictive factors to produce not only superior returns over traditional investment strategies, but also opportunities. of investment with much better risk-reward paradigms than those produced. by traditional investment strategies. Here are 10 reasons why long tail investing is the only way to build wealth.
(1) You will never achieve the level of wealth you want by handing over your money to a large investment firm. The vast majority of private investors give their money to large institutions and allow them to invest their money for them. If this really was the best way to achieve financial freedom, almost everyone you know would love their financial advisor. Think of how many people you know who are absolutely raving about their financial advisor.
The fact that 90% of the people you know are not enthusiastic about their financial advisor should tell you that niche investing strategies, or long tail investing strategies, are far superior. Those who are happy with the big investment houses were already independently wealthy before seeking their help. Think of how many people you know who have told you, “I wasn’t rich before, but thanks to my investment company, I am now richer than I ever dreamed.”
(2) Thanks to the evolution of information technology, there are many other means of making investment decisions than simply using fundamental and technical analysis. Although it has taken people a long time to understand this, once they do, long-term investment strategies like those invented by SmartKnowledgeU(TM) will thrive. There is no question that the level of top-tier financial, political, and corporate information available to the average investor has increased by leaps and bounds over the past decade.
There is a virtual treasure map that was created by the flattening of the world over the last decade to select stocks that are about to explode. However, because the world’s largest and most powerful investment institutions have kept the masses of investors fixated on traditional investment techniques such as value and fundamental analysis, the long tail of investment strategies is currently much further behind in its development phases than it should be.
The best analogy I can use to explain 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 began preparing its country for IPv6 a decade ago, the benefits of increased security and its value-added properties in e-commerce were apparent even then. However, people in the US became comfortable with lesser IPv4, so they took no action until the progress and superior Internet and business capabilities of China, Korea, Taiwan, and Hong Kong finally put people to shame. the US enough to go ahead 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 spread over the last few decades, so no one sees the need to move forward even though there are much better strategies out there today. As with IPv6, the world will eventually realize that the safest and best way to invest money lies in the long tail, and will eventually adopt these strategies.
(3) With so much investor skepticism about corporate integrity sparked by past accounting scandals at Enron, WorldCom, General Motors and the like, and current and ongoing back option scandals, investors will increasingly seek alternative means to make investment decisions other than numerical calculations. who feel they are not trustworthy. Furthermore, technical analysis often returns false positives as well. A chart will show indices appearing bullish after breaking through a resistance top only for the index to drop back down for an extended period of time, or a chart will appear bearish after breaking through a resistance bottom only to turn around and start another bull run.
In fact, you’ve seen some of these changing trends in some of the technical posts I’ve put up on my blog in previous months. In fact, this is why I always say that I never rely solely on technical indicators to make my decisions. I only rely on technical indicators to confirm or dispel what my long tail investment strategies are telling me. Of the three types of analysis, fundamental, technical, and long-tail, long-tail investment strategies produce by far the fewest false negatives and false positives. That’s why I trust them so much.
This sentiment will lead to an evolution of long-tail investment strategies and the discovery of more efficient and better predictive means of making investment decisions than even those that already exist. Even today’s long-tail investment strategies, such as those used in SmartKnowledgeU(TM), are constantly evolving as access to reliable information increases each year. Making decisions like a fly on the boardroom wall 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: sales strategies cleverly disguised posing as investment strategies. Once people realize this, long-term reversal strategies will gain wider acceptance, just as acupuncture and herbal medicine gained credibility as healing regimens in Western medical schools.
(5) Greater acceptance of alternative long-tail investment strategies that far exceed those used by global investment firms will occur as word of successes through these strategies spreads around the world via from Internet. The Internet distribution channel can and will be used to change the mindset of investors.
(6) DIYers are growing up: With the success of books like Stephen Covey’s “The Eight Habits,” which emphasize personal responsibility for excellence rather than handing over control to someone else, there will be cultural changes in that people will seek control over their own financial future rather than simply handing over their money to a company to manage. As this cultural shift occurs, multitudes of people will find that they are significantly lowering their returns each year by handing over their money to global investment houses.
(7) The flattening of the world and the accessibility of previously inaccessible investment information will undoubtedly produce an increasing number of investment strategies that reside in the long tail. People will realize how foolish they are to believe in the only investment strategy that has been foisted on them by global investment houses for the last half century as “the only viable and safe way to invest.” If the younger generation is interested in investing, adding their creativity to the investing field will result in explosive growth in the long tail of investment strategies. However, since the odds of this happening are quite low, a more gradual shift towards niche investment strategies is much more likely.
(8) The explosion of social networking sites like YouTube, MySpace, Friendster, etc. will amplify the viral marketing of long tail investment concepts. Once again, ignorance of long-tail investment strategies breeds fear and hesitation to use them. Viral marketing of long tail investment concepts will increase the comfort level of millions of investors with these different and unique concepts.
(9) Ultimately, people are interested in returns, no matter how much global investment firms try to separate themselves from their competitors with smoke-and-mirror service claims. All the gratitude for the luxury boxes at the Los Angeles Lakers games, the suites at the Four Seasons hotel, the golf course conferences and the world-class resorts will quickly fade once people realize how much more money are making with long tail investment strategies.
(10) Again, because people will easily give up all the benefits they get as preferred clients at a large investment firm for vastly superior returns on their portfolios, long-term investing will eventually reach critical mass. Eventually, the long tail of investing will migrate to the center and become the main investment methods, although this may take several decades to occur.