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Fool HQ once had a summer investing intern named Igor. Igor was a very talented Russian American who brought along his own investing smarts. I wish every 19-to-20-year-old was as thoughtful, as energized, and as wise beyond his years about money.
I asked him, “How’d you get started, Igor?”
“I had a mentor who got me started investing. He was a guy a year ahead of me at college… The funny thing is, he’s no longer investing!”
His friend had exhibited two distinctive tendencies with his investing, Igor conveyed: The first was he loved to find very early, so-called “development-stage companies.” These are companies that not only don’t have profits, but in some cases they don’t even have revenues. His friend’s passion about these kinds of companies had inspired him to teach others — like Igor — about investing.
The second was he loved to go almost all in when he invested. He was a so-called focused investor. He had very few companies. When he found something that he liked and he believed in, he would pile what you and I might think of as an alarmingly high percentage of his money into those few ideas.
I replied, “I’m not surprised that your mentor is no longer still in the game.”
Play that approach forward a bit — that system — and it doesn’t take too long to see what happens. Highly focused development-stage investors might get it right a few times… but when they get it wrong, they lose a lot of money. And when they’re specifically targeting early-stage, development-stage companies, it’s highly likely that a few of those aren’t going to play out so very well. Which means: They’re no longer investing.
Which is a shame! Because you have to love the passion. Young people are so advantaged in that the wealth they’re building will compound their whole lives long.
Picture a four-quadrant matrix where the vertical Y axis labeled “Company” goes from “development-stage” to “mature.” The X axis, labeled “Investor” goes from “all-in” to “diversified.”
Where is Igor’s mentor plotted?
Ah, but now we’re talking STYLE-BOXING. That deserves its own blog.