Cathie Wood – How To Achieve A 31 – Return Per Year (4 Investing Rules)

Speaker 1: Kathy Wood founded her investing firm AAK Invest in 2014 since inception. She’s achieved a 31 percent annual average return that’s around two and a half times more than the return of the S&P 500. Now, this wasn’t just luck. Funnily enough, it’s not easy consistently beating the market year in and year out, let alone beaten up by more than two times the amount.

No, she achieved this through calculated investing principles and calculated investing moves. So what we’re going to do in this video is show you four key rules. Kathy would used to absolutely trounce the market. OK, what is Kathy would most known for, what is the main way, what has made so much money through her investments? Those who follow her will know the answer to this. It’s by investing in innovation. And with that, I mean innovative companies, those that are changing the way the world operates right now. Let’s think about this for a second. What were the companies that made the highest returns over the past decade? They were the likes of Netflix, over a 7000 percentage return in 10 years. Netflix, they were innovative. They were disruptive in the film and media sector absolutely changed the way people watched films and content.

What is it? Fourteen dollars a month. You can watch thousands of different movies and TV series any time you once don’t have to go to a movie theater or eight hours for it to come on TV. No Netflix changed all of that through. Innovation is the same with Apple over 1800 percent return in ten years. They changed the way we used phones. They changed what phones can do. Who would have thought ten years ago the amount of things that you can do with a simple smartphone in your hand. Apple Steve Jobs dreamed that up through innovation and made their investors ridiculous returns Facebook. It’s another example, an extremely high return over the past decade. No, no need to send letters any more or post pictures or dial a phone. Just upload to Facebook or, you know, take two seconds to send a photo or message. OK, what am I getting at as these disruptive companies that have made the most money, the highest returns? And these are the types of companies that Kathy would focus is on, the ones that will do this over the next five to ten years.

So if we go to her website on our invest and a fun description in objective act defines the disruptive innovation as the introduction of a technologically enabled new product or service that potentially changes the way the world works. And when you buy companies that do this, it’s a game changer with investing because the growth opportunities with these companies is not just 50 or 100 percent growth. They have the capacity to quadruple ten times, 20 times the initial investments. This is why I would say people who want to succeed should think like a disruptor that’s going to become more and more true because so much is changing in the world and quote. There are four sectors that Cathy focuses on when it comes to her stock investments, these sectors are high growth.

These sectors have the ability to compound a gigantic writes over the next couple of years. And they all have what we talked about earlier on. They are all disruptive. OK, so let’s read this on our investor websites. Companies within an week include those that rely on or benefit from the development of new products or services, technological improvements and advancements and scientific research relating to the areas of our DOT DNA technologies, genomic revolution, industrial innovation and energy, automation and manufacturing, the increased use of shared technology, infrastructure and services. Next generation Internet and technologies that make financial services more efficient. FinTech innovation. So let’s break each one of these industries down piece by piece so that we know exactly what she’s talking about.

The first sector is the genomic revolution. This is fascinating. This is not just a game changer, it’s a world changer. I can’t tell you how big this will be in the future. So I’ll just get you to think of this. Imagine you were born with some type of gene era. You were prone more to cancer or other types of illnesses. Geneticists will all have them will use technology to identify these gene errors and correct them. Even if you don’t have a major illness or anything like that, you may have poor genes in certain areas. And in the future with genomic technology, we can correct this for better genes. This is why I can best says genomic innovations can help us restructure health care, agriculture, pharmaceuticals and enhancing the quality of life. And this is what Cathy Woods said about it and the future. I want to get your genome sequenced like every other physical exam, because I want to see what genes have mutated in your body, she explains. They want to do that because mutations, which are simply programing errors in the genome, are the earliest stage of disease, one of the first human trials of this. As for pediatric blindness, so babies who are blind, wouldn’t it be miraculous if we could edit their blindness out so that they can see? This is why Wood’s third largest stock is CRISPR Therapeutics, because it’s got potential to be a game changer in genomics in the future. Next, we’ve got the industrial innovation sector in energy, automation and manufacturing.

OK, Tesla, that’s one example of a company absolutely dominating in the sector, self-driving cars, factories that are relatively autonomous, energy that is clean and good for the environment. Tesla does all of this. And, you know, we’ve seen pretty decent progress in the sector lately. But in the next three, five, 10 years, it will be so much more. No need for taxi drivers, factory workers, no need to pollute the environment. Automation and clean energy will change this. And you don’t need to wonder why. Why would the largest position is in Tesla stock? Because they’re a game changer and so many different fields. The third sector is next generation Internet. We’re talking things like 5G, allowing virtual reality at maximum speeds, things like Spotify allowing music online and everywhere you go, you don’t need albums anymore. Just use YouTube or Spotify. Think how next generation Internet has changed things already and imagine how disruptive it will be as time goes along. Now, the last sector that would focus on investing in is the fintech sector technologies that make financial services more efficient. Companies like Square, which she owns, which allows businesses to accept credit cards online or send money to family and friends with the cash app. At the end of the day, the online world is altering the way we can move money around. You don’t need cash to physically give someone any more. You just need a computer. Things like bitcoin and crypto, which creates an easy, seamless, safe way of exchanging money.

They will become more used as time goes along, money that is controlled by banks, the government, the Fed that can be endlessly printed. It’s just not as efficient as crypto. This is well known crypto and bitcoin as a currency old altering idea and platform, as was said, bitcoin as a bigger idea than Apple, which is a pretty big idea. That’s worth over two trillion dollars, changing the world’s currency, changing the government’s control over money, changing fees associated with transaction, that is a disruptive sector. One thing that you notice about wood is she’s a bold investor. If she sees an opportunity, if she sees an area that has potential to make money, she’ll bet big on them. Tesler It’s a perfect example of this. Back in 2018, would saw a huge opportunity in Tesla and its growth potential. She made headlines by saying that the stock could go to four thousand dollars a share, which, by the way, this was before the five to one stock split. So she was actually pretty accurate with that prediction. But back then, Tesla had a lot of doubters. Still does. They doubted would they doubted her predictions, but she did what most investors wouldn’t do. She backed herself, bought and maintained a large position of Tesla, and it paid off since 2018. Tesla has gone up over 1000 percentage points. You know, the question is, why did Cathy make this big bet? Because she had done her research. She knew what she was buying and she knew Tesla’s potential.

So she didn’t go half hearted in her approach. She made it her biggest stock position and she put a lot of capital behind it. You know, if she had only put in, let’s say, one fifth of the amounts, while it seems redundant to say, but she would have made one fifth of the potential return, when you see an opportunity that you understand well, that has high potential to go big on its. OK, let’s think about it, how it would absolutely trounced the market returns, the market returns in which most big investors were either losing to or getting similar results. Kathy destroyed these returns, but she did this through not following conventional wisdom and conventional investing. You know, it makes sense if you invest conventionally, you’re going to get average results. And the great thing about today’s market is so many people invest conventionally. What this does is it creates opportunity for those who invest differently. As Woods says, if you are buying into a vacuum of conventional wisdom, the potential to capitalize is enormous because you need to start thinking outside of the box to start beating the market instead of thinking what has done well in the past.

Think of the future and what’s going to change the world, not what has already happened. But if you invest this way, you need to invest with conviction or else you get blown away by the naysayers. Just like when word was investing in Tesla in 2018, people thought she was crazy for investment and price prediction, she said people would say, oh my gosh, you were made fun of. You were ridiculed. They traded your research with derision. But those were the most exciting times for me because I always believed truth wins out. And what did she do? She backed herself. She trusted her independent research, her nonconventional ways and made a ton of money.

So these are just some rules to go by that Cathy has used to deliver. Well, one of the best investing returns that we’ve seen over the past decade, half a decade and while OK, let’s just say it might not be the worst idea to learn from her and try to get similar results.

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