Beyond Stocks: Diversify for Success

Hello investors!

Today, I would like to discuss the importance of diversifying your investments beyond the stock market. Many investors turn to alternative assets to spread risk, capitalize on unique opportunities, and potentially enhance overall portfolio returns. As the renowned investor Warren Buffett has often stated, "Do not put all your eggs in one basket." The wisdom behind diversification is that it can reduce the impact of poor-performing investments on your portfolio.

In todays letter

• Learning: Beyond Stocks: Diversify for Success

• News insights

  • Amazon's New Fee for Self-Shipping Sellers

  • India's Inflation Hits 15-Month Peak: Weekly Economic Updates

  • Musk Promises a Financial Revolution with X

• Key takeaways from video Principles For Success In Investing & Life w/ Ray Dalio

Beyond Stocks: Diversify for Success

Buffett, along with his business partner Charlie Munger, are advocates of value investing - the practice of buying undervalued assets that have the potential to increase in value over time. Although both have made substantial returns from investing in stocks, they have also placed capital into other asset classes like real estate, private companies, and even whole businesses. For example, Berkshire Hathaway, the company led by Buffett and Munger, owns several fully operational businesses ranging from insurance to consumer goods.

When considering alternative investments, here are five key points to keep in mind:

1. Research Is Crucial: Just like in stock investing, due diligence is essential. Investigate the asset's fundamentals, market trends, and potential risks before making an investment.

2. Diversification Reduces Risk: Spreading your investments across different asset classes can help reduce risk. If one asset performs poorly, others may still generate positive returns.

3. Consider Liquidity: Some alternative assets may be less liquid than stocks, meaning it can be harder to buy or sell them quickly. Ensure your portfolio maintains a balance of liquid and illiquid assets.

4. Long-Term Perspective: Value investing often involves a long-term horizon. Be patient, as some investments may take time to realize their full potential.

5. Align With Your Goals: Ensure your investments align with your financial goals, risk tolerance, and investment timeline. Not all alternative investments are suitable for every investor.

Diversifying your investment portfolio with alternative assets can offer several benefits, including reduced risk and potential for enhanced returns. However, like any investment decision, it requires careful research and consideration. As Buffett once said, "Risk comes from not knowing what you're doing." So, arm yourself with knowledge, seek expert advice if needed, and make informed investment decisions.

News insights

Amazon's New Fee for Self-Shipping Sellers

Amazon has announced a new fee for its Seller Fulfilled Prime (SFP) program, in which third-party merchants can ship their own packages and still include the Prime badge on their listing. Starting on October 1, these sellers will be required to pay Amazon a 2% fee on each sale, a change from the previous policy which had no such fee.

[📝Full article]

Key takeaway

The new fee imposed by Amazon on its SFP program could affect third-party sellers' margins and increase their costs of doing business on the platform. For investors, this move suggests that Amazon is looking for additional revenue streams and is willing to leverage its dominant position in the marketplace. It may be worthwhile for investors to watch how this impacts Amazon's earnings and how third-party sellers respond to the fee changes. However, it's important to consider the broader regulatory landscape, as the Federal Trade Commission is reportedly preparing to file a lawsuit against Amazon.

India's Inflation Hits 15-Month Peak: Weekly Economic Updates

India's annual retail inflation reached a 15-month high in July, driven by escalating food prices, especially vegetables and cereals. Inflation surged to 7.44%, up significantly from 4.87% in June, with food inflation, which accounts for about half of the total consumer basket, leaping to 11.51% in July from just 4.49% the previous month.

[📝Full article]

Key takeaway

The sharp rise in India's inflation, particularly in food prices, is concerning as it affects a large portion of the population's daily expenditures. For investors, this signals potential pressure on consumer spending and possible interest rate hikes by the central bank to curb inflation. Investors should monitor the impact of these inflation levels on consumer sentiment, corporate earnings, and government policy. It may also be wise to consider the effect of these developments on sectors such as agriculture, retail, and manufacturing in India.

Musk Promises a Financial Revolution with X

Elon Musk has announced plans to transform the rebranded Twitter, now known as X, into a platform that will allow users to conduct their "entire financial world" in the coming months. Musk acquired Twitter for $44 billion in October 2022 and has been pushing for the integration of financial services onto the platform. The rebranded platform will reportedly include comprehensive communications along with financial services, with plans for banking, payments, and more, potentially rivaling China's WeChat.

[📝Full article]

Key takeaway

Elon Musk's move to expand X beyond social media into financial services is ambitious and could have a significant impact on the financial landscape. For investors, this may offer opportunities to gain exposure to a platform that aims to encompass a significant portion of the global financial system. However, it's essential to consider the regulatory challenges Musk's enterprise could face, as well as the competition from existing financial institutions and tech companies with similar offerings. Investors should carefully monitor developments regarding X and its financial services offerings, as well as assess their risk appetite and investment strategy before taking any action related to this announcement.

Key takeaways from video Principles For Success In Investing & Life w/ Ray Dalio

Here are five key takeaways from the first segment of the video:

1. Principled Approach: Ray Dalio attributes his success to a principled approach. He emphasizes the importance of writing down principles for decision-making and testing them. This approach has been transformative for him, allowing him to systemize decision-making and communicate better with others.

2. Guided Journal: Dalio's new book, "Principles: Your Guided Journal," is designed to help people write their own principles. He believes that individuals should have their own principles for dealing with their unique circumstances.

3. Self-Discovery: Dalio emphasizes the importance of self-discovery and understanding one's nature. He believes that life is largely a journey to discover one's nature and find paths that suit that nature.

4. Principle You Test: Dalio created a free test called "Principle You" that helps individuals understand their preferences and personality. The test can also show what a person's relationship with another person is likely to be like based on their preferences.

5. Shaper Personality: Dalio identifies himself as a "shaper," someone who likes to visualize something and build it out. He is excited about new ideas and adventure. He recognizes that he needs people who are strong where he is weak, such as those who are meticulous and reliable.

[🎥Full video]

That’s all for today, thank you for reading.