The key to long term returns

by | Mar 7, 2001 | Archives

Pssst! How would you like to make 1,000% next year? Read on.

The question below from an eClub members highlights the keys for long term returns.

Hello Gary,

I have a lot of respect for you and when I read on your site that earning high returns like this below his almost impossible, I would like to know what you think of these figures. I took them from a newsletter on the web. They are dated from last summer I think.



Top 10 Offshore Funds ================================================================ 	 	For the year ending July, 1999, the following funds posted these percentage changes 	- gross income reinvested. (source Micropal) 	 	1.  RSAIFS/Lippo Indonesian Growth - 505.1% 	2.  Lippo Indonesian Growth - 449.2% 	3.  Korea Open Fund - 309.8% 	4.  Malacca Fund (Cayman) Ltd - 276.8% 	5.  Nicholas-Applegate US Growth Equity - 273.8% 	6.  BBL (L) Invest Indonesia C - 262.4% 	7.  BBL (L) Invest Indonesia D - 262.2% 	8.  Fidelity Funds Indonesia - 252.7% 	9.  The Yellow Sea Inv Co - 249.1% 	10. Paribas EM Indonesia Ptfl - 248.9%


My reply to this reader help us see the risks of investing in things we don’t know about.

This is an excellent question because returns like this are real and in this reality lies a great risk. I know because I used to invest and write about returns just like this in my newsletters. Guess what happened? After such retruns these same markets would often crash. In fact sharp spikes like these are one indicator (but no guarantee) of a likely crash. For example one time I wrote about Japanese Warrant mutual funds that were up 998% in 18 months! How fantastic I thought. I invested $25,000 myself (this was ten years ago). Today the same fund is worth $8,000.

There are many investments that will rise 100%, 500% even 1,000% in the year ahead. But we cannot see into the future. Thus when investing we have to spread our risks because some investments will win and others will lose. These warnings I send about scams come from years of experience managing millions and working with portfolio managers around the world. You or I may well indeed make 1,000% in the year ahead in one lucky place, but we might lose 1,200% in the same place the year later.

Good long term results are different from a flash in the pan. The way to overcome this problem is to invest only in what you know so you can see more reasons than just past performance why an investment or business may grow in the year ahead. This gives you alittle vision into the space ahead. But more impoartnat if you are investing in your own busiess you gain greater flexibility so you can adjust to the conditions and realities that unfold.

This fact is the root of my Inspired Investing and International Business Made EZ courses which I will conduct at our upcoming international Investing and Business course in Vancouver BC April 26 to 29. I hope to see you there. Until then, good and safe global investing!