You should invest the way Rafael Nadal plays tennis.
Nadal famously plays tennis left-handed, even though he's a natural rightie. Since the vast majority of tennis players hold their rackets in the right hand, this gave Nadal an unfair advantage early on. Rafa still signs autographs and throws balls with his right hand, long after becoming the world No. 1 with a dogged determination to master the left-handed game.
You should adapt your investing style the same way.
Maybe you're a natural value hound, always looking for the next big markdown on blue-chip stocks. You could add a terrific punch to your portfolio by putting a stable dividend payer like Paychex (Nasdaq: PAYX ) aside to take a closer look at high-growth stocks like Iridium Communications (Nasdaq: IRDM ) or Hansen Natural (Nasdaq: HANS ) . Even the stodgiest of investors could learn to appreciate and then exploit the potentially market-crushing returns of a smaller, nimbler class of companies.
Conversely, growth chasers would do well to learn something about value stocks. Me, I'm a Rule Breaker by heart -- but you may have noticed that I care a great deal about proper valuation these days. Advanced Micro Devices (NYSE: AMD ) is one of my favorite stocks since way before I joined The Fool, but I'll tell you if and when AMD is too expensive to start a position.
Taking valuation and momentum into account is about as natural to me as playing tennis left-handed. But adding these tools to my arsenal has made me an all-star CAPS player. Some value know-how can increase the returns of your growth-stock holdings and add some long-term stability to your portfolio.
Having a well-rounded toolkit even helps you recognize when a stock falls into both the growth and value categories. That's where AMD is again today, after a short stint in the overvalued growth bucket. DragonWave (Nasdaq: DRWI ) will ride its wireless-communications chips to great heights, but it's priced as if it were going out of business. Google (Nasdaq: GOOG ) has the unique distinction of being both an Inside Value recommendation and a Rule Breaker, which shows its top-dog status in a growth field, but also a low valuation relative to its imposing economic moat. Brookfield Infrastructure Partners bridges the gap between value and small-cap investing, among other things. All of these stocks look tremendously exciting, thanks to their balance between growth opportunities and rock-bottom valuations.
Isn't it time you switched your investing racket to the other hand for a while?
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