The Motley Fool

Is It Advisable To Mimic An Investing Guru’s Portfolio?

Investing can be a difficult process, and great investment ideas are few and far between.

Aside from reading extensively and digging deep into news articles and annual reports, investors may also look for short-cuts by mimicking others’ portfolios. This is especially common when people recognise an influential investor or encounter an expert investor who is held in high regard. Here are some reasons why this is a bad idea.

Different Investment Goals

This should be fairly obvious on the outset – the guru or expert would have very different investing goals and objectives compared to the investor who is mimicking him. This implies that the investor who copies his actions may inadvertently end up with a portfolio which does not suit his personal preferences and circumstances.

Lag Time In Reporting

Many renowned fund managers and investment gurus are required to report their holdings by law (in the United States, this is regulated by the Securities and Exchange Commission) every quarter. Therefore, there is a lag time in reporting their holdings. This means that by the time the investor gets information on a famous fund manager’s latest portfolio purchases and sales, it may already be too late as the prices of such securities may have changed significantly.

A Substitute For Critical Thinking

Copying another investor’s portfolio is a perfect example of laziness, and over time, this will lead to a severe deterioration in the investor’s analytical ability as he has become so reliant on another person’s logic and actions. By blindly mimicking, the investor is looking for a poor substitute to critical thinking and therefore copying should be strongly discouraged.

The Foolish Bottom Line

As can be seen above, there are many pertinent reasons why investors should not blindly mimic portfolios or investment decisions. The proper thing to do after getting investment ideas from the experts is to conduct your thorough research to be familiar with the company first, before allocating money to the investment idea.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.