Source: Federal Reserve Bank of New York

Proponents of the efficient market theory will have you believe that it's not possible to beat the market.

I'm here to tell you that it is.

From Sept. 1, 2011 to June 5, 2015, I managed Tier 1 Investments, a Motley Fool real-money portfolio. Tier 1's returns during that time were 128.43%. The return of the S&P 500 for the same period was 88.37%.

Tier 1 therefore outperformed the market by more than 40% from inception to close.

Naysayers will chalk up Tier 1's performance to luck. Academics may question the statistical significance of its track record. And others may try to "risk-adjust" its returns.

To each his own.

One fact that cannot be argued is that an investor who followed Tier 1's buy and sell alerts would have 40% more wealth than if they had invested in an S&P 500 index fund during that time.

Unfortunately, the program of which Tier 1 is a part -- Motley Fool's Real Money Stock Picks (previously Rising Stars) -- is being closed. So, I will no longer be directly managing Motley Fool capital in full view of the public.

But rather than making this article a final listing of my views on all of Tier 1's investment holdings (which I believe are all still solid long-term investment options), I'd rather leave you with the foundational principles that helped guide Tier 1 to its market-beating performance.

Below you'll find the original investment policy statement that I delivered to the Motley Fool's chief investment officer at Tier 1's commencement. It contains my core investment philosophy and strategies, views on risk and expected return, as well as what I believe helps to form Tier 1's "edge," or competitive advantage over other portfolio managers.

My hope is that it will serve you as well as it has served me during my time as portfolio manager of Tier 1.

Tier 1 Investment Policy Statement -- Philosophy & Strategy
At Tier 1 Investments, a Motley Fool Real-Money Portfolio, I seek out and invest in the world's elite businesses. These include companies with the most valuable brands, best business models, strongest competitive advantages, superior products and services, and excellent management. They are the innovators, disruptors, and best of breed. These businesses are ... Tier 1.

I seek out the best businesses because they often turn out to be the best investments. However, investors often miss out on these opportunities because the stocks of premium companies almost always look expensive, except in the rearview mirror. And so while I strive to buy stock in these businesses at great prices, I am willing to pay a reasonable price for quality.

Most of the companies in which I invest will be U.S.-based organizations, but I will maintain a global perspective so as to not place unnecessary limits on my pursuit of elite businesses. Therefore, potential portfolio targets include both U.S. and international stocks and all market capitalization classes.

I also do not place much emphasis on traditional classifications of "value" or "growth" stocks; I believe in seeking out value in all its forms. As a portfolio service, I reserve the right to use shorting and options strategies to hedge positions, as well as magnify gains.

Competitive advantage
Many other portfolio managers state that their goal is to beat a particular market benchmark, but upon close inspection of their holdings, one can see that their portfolios are basically closet index funds. Tier 1 Investments will not make that mistake. I have one goal, and that is long-term market outperformance. As such, I will not align the Tier 1 Portfolio with conventional sector weightings or dilute the portfolio with hundreds of stocks. I will focus my research, analysis, and thoughts on my very best ideas. I therefore expect to hold less than 25 positions.

Risk and volatility
Investing in premium businesses requires a commitment to hold them through the inevitable market downturns. Investors can take solace in the fact that these companies often strengthen their competitive positions during economic downturns, and their stocks are usually the first to rebound when markets recover. As a concentrated portfolio, investors should expect Tier 1 to be more volatile than the S&P 500. However, I believe volatility and risk are two very different things. I define risk as the chance that an investment outcome will be a substantial loss of capital. I therefore expect my focus on superior businesses to lessen risk over the long term.

Expected return
The market has historically returned about 10% per year, but more important to today's investor are future returns. My goal is to beat the S&P 500 over the next 10 years.

Final thoughts
Although I won't have the opportunity to manage Tier 1 for the decade that I had hoped, I'm happy to say that Tier 1 accomplished its mission by substantially beating the S&P 500 in the nearly four years that it existed.

I'm also humbled and honored to say that Tier 1's 40% outperformance relative to its benchmark is the largest among all of the Fool's real-money portfolios. That means a great deal to me, as I believe some of the best investors in the world reside at The Motley Fool. I've had the privilege and honor of working beside master investors like Tom and David Gardner, Jeff Fischer, Joe Magyer, and a host of others far too numerous to list. Tier 1's performance is a direct reflection of all that these outstanding investors have taught me. I am eternally grateful for their generosity, and I intend to pass on what I've learned.

In closing, my hope is that the key takeaway for investors is simply this: It is possible to beat the market. And the best way I know how to do so is to seek out and invest in the world's elite businesses.

Finally, if you'd like some help finding these Tier 1 enterprises in the years ahead, you can connect with me on Twitter @Tier1Investor.

Editor's note: The Motley Fool launched its Rising Stars Portfolios program in late 2010. Twenty-five analysts took part in this endeavor, investing hundreds of thousands of dollars of The Motley Fool's money in hundreds of stock ideas. With the analyst tally in the program now called Real-Money Stock Picks down to four, the Fool has decided to close the remaining portfolios. It's a logistical decision and no reflection on the analysts or their stock ideas.

The Fool will keep some stocks chosen by the analysts in a Robert Kirby-like Coffee Can Portfolio. We're going to hold them, for a long time, without checking in, without trading. We count the Real-Money Stock Picks program a success in our mission to help the world invest better. 

Sept. 18, 2017: The Motley Fool intended to hold some Real-Money Stock Picks stocks, but this turned out to be a logistical burden, so the stocks were sold.