For an individual, owning 40 stocks might seem like a pretty diversified portfolio, but when you're a mutual fund like Legg Mason (NYSE:LM), that's actually quite concentrated. Yet it's that focus that has allowed Value Trust fund manager Bill Miller to best the S&P 500 index for 15 years running.

A lot of media reports have commented that Bill's squeaker this year -- Value Trust returned 5.3% while the S&P returned 4.9% -- was only possible because of the big bet Legg Mason made in Google (NASDAQ:GOOG), equal to a little more than 3.5% of the fund's holdings, along with large stakes in health insurers UnitedHealth (NYSE:UNH) and Aetna (NYSE:AET), which together comprise 10% of the fund. Even though seven of the fund's 10 largest holdings rose this year and five of them gained more than 10%, there was no presence in the energy sector, which had an exceptionally strong showing this year.

While Bill Miller's winning streak has become the stuff of legends, I find that a number of the principles he employs translate well for individual investors to emulate in their own portfolios.

  • Broad diversification. Individuals who own 20, 30, or even 40 stocks will have a broadly diversified portfolio, which will minimize the impact should any one or two holdings melt down, while still allowing market-beating returns.

  • Buy-and-hold. Miller eschews the trading mentality, preferring instead to buy good companies and hold them for the long haul. The Value Trust turnover rate is just 9%, which puts it on par with the average index fund's 5% turnover ratio. A mutual fund with a 100% turnover rate means that every stock in the fund is sold, on average, every year. One with a 20% turnover rate means the average stock lasts five years in the fund, and a 10% turnover rate would mean a stock was sold once every 10 years.

  • Let your winners run. There's no set sell point in Miller's portfolio. Too often, investors sell after their stocks have gone up 20%, 50%, or 100%, thus cutting the potential profits they can achieve. Miller has let his winners keep winning, with UnitedHealth up 43% this year and Google up 118%, and no timetable set on when to sell.

  • Making big bets. It's a characteristic reminiscent of Berkshire Hathaway's (NYSE:BRKa) (NYSE:BRKb) Warren Buffett, who also likes to take a large position in a company (he usually buys it outright) and then holds onto it for a very long time. It also shows you don't have to be in every "hot" sector to achieve success. Buffett avoided technology during the Internet bubble years; Miller has avoided energy stocks this year.

  • Reduce costs. Because of its success, Value Trust has grown huge, to more than $19 billion, while also sporting a pricey 1.68% expense ratio. The average fund has an expense ratio around 1%, while a Vanguard index fund has an expense ratio of around 0.2%. By employing the same methodologies, you can avoid paying any such fees and keep all of your money working for you.

These are all simple strategies individual investors can use on their own to great success. Miller has managed the Value Trust fund since 1982 -- a hypothetical $10,000 investment in Value Trust back then would be worth more than $350,000 today -- but there's talk of possibly closing it to new money.

While there will be naysayers doubting that he can do it again, Bill Miller will be back in 2006 to take on the market one more time. Investors can be there, too, to test their own financial skills.

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Fool contributor Rich Duprey does not own any of the stocks or funds mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.