Stanley Freeman Druckenmiller is an American investor, hedge fund manager, and philanthropist. He is the former chairman and president of Duquesne Capital, which he founded in 1981. At the time of closing, Duquesne Capital had over $12 billion in assets.
Unlike other investors, Druckenmiller has a unique investing style. He does not adopt traditional investing strategies like most others do. What’s more impressive is that throughout his career, he’s never had a single down year.
Here're some of Druckenmiller's secrets to outperformance.
Invest in the future, not the present.
“Visualise the situation 18 months from now, and whatever that is, that’s where the price will be, not where it is today.” “Never, ever invest in the present. It doesn’t matter what a company is earning, or what they have earned.”
Past performance is not a guarantee of future returns.
With the pace of technological innovation, change is the only constant. The future is likely to be drastically different from the present. Only those who are prepared will benefit.
Diversification is overrated.
“Put all your eggs in one basket, and watch that basket very closely. If you really see it, put all your eggs in one basket and watch the basket very carefully.” “Diversification and all the stuff they’re teaching at business school today is probably the most misguided concept everywhere.”
Concentration is not a problem, provided you know what you’re doing. If you don’t, then it’s best to diversify.
EQ matters more than IQ in investing.
“Good investors are successful not because of their IQ, but because they have an investing discipline” “What is more disciplined than a machine? A well-researched machine can make many average investors redundant, leaving behind only the really good human investors with exceptional intuition and skill.”
Investing is 20% skill, 80% psychology. Mind over matter. Strong minded people will likely have more holding power than their weak minded counterparts.
Risk vs Reward
“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong”.
The key to successful investing is making more when you’re right and losing less when you’re wrong.
“I don’t really like hedging. To me, if something needs to be hedged, you shouldn’t have a position in it.”
That’s why the saying goes: “Diversification is a hedge against ignorance.”
If you find yourself hedging a position, it’s likely that you don’t have the confidence or conviction in the company. When the stock price falls, you’re likely to panic sell. In which case, you probably should not even own that stock.
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