Are You an Investing Maverick?

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Though we've heard a lot about mavericks during this campaign season, the term might not mean what you think. A recent New York Times article traced the term to a family name with roots in America back to the earliest colonial days -- one known for its progressive beliefs.

In the 1600s, an early Maverick fought for the rights of indentured servants. And in the 1800s, a Maverick in Texas didn't brand his cattle, focusing instead on his land. Unbranded cattle were soon known as "Mavericks," and the term came to represent independence versus just running with the herd.

One Maverick is responsible for the term "gobbledygook," which he coined in frustration with the unnecessarily complicated jargon used by many bureaucrats. Yet another Maverick, a lawyer, defended atheists and those who resisted the draft.

Investing mavericks
Reading about this interesting family, and thinking about how freely the term "maverick" gets tossed around, I began wondering how a maverick would invest.

Like many people, you might be a conservative investor, gravitating toward established blue chips in search of stable dividend income. These days, you'd probably be eyeing Merck (NYSE: MRK), General Electric (NYSE: GE), or even Microsoft (NYSE: MSFT), with recent respective dividend yields of 5.3%, 6.1%, and 2.2%. That's not a particularly maverick approach, though.

True maverick investors would likely buck the status quo, stick to their unconventional beliefs, and put their money where their mouths are. This sounds a lot like Rule Breaker investing to me. Fool co-founder David Gardner has been sharing the Rule Breaker concept with Fools for a decade or more now, and I've made some good money devoting a slice of my portfolio to such investments. My Time Warner (NYSE: TWX) shares have been more than a 10-bagger for me. 

Rule Breaker investors look for dynamic companies in emerging niches. They may be biotechnology firms, such as Elan (NYSE: ELN), or tiny nanotechnology enterprises, bundled into funds such as the PowerShares Lux Nanotech ETF along with bigger companies like Hewlett-Packard (NYSE: HPQ). Rule Breakers believe in the power of new industries that appear suddenly, driving sage rivals into obsolescence -- i.e., the Internet and the damage it's done to newspapers, or the arrival of computers and its effect on the typewriter.

If you can find and invest in such industries when they're still young, you stand a chance of spectacular returns. But maverick investors should remember that not all bold investments will turn into huge money-makers. I discovered Intuitive Surgical (Nasdaq: ISRG) in our Rule Breakers newsletter a little more than a year ago. It surged more than threefold in the first year, but it's since fallen to slightly less than twice what I paid for it. Other Rule Breakers will give investors temporary and sometimes permanent losses instead of gains. See? Volatile.

In context
Many, if not most, investors can and should do just fine without Rule Breaker investing. Even if you're drawn to its possibilities, consider devoting only a portion of your nest egg to it. Balance your portfolio's would-be racehorses with steadier fare.

And next time you hear the word "maverick," think about an old, progressive American family; about people brave enough to stick to their convictions against the status quo; and about investors parking their money in America's future.