What is Cloning?
A clone is simply a portfolio of stocks created based on the stock ideas of one or more successful fund managers. Empirically, cloning the stock ideas from top money managers has proven to outperform the overall market. It is a powerful way to validate an investor’s own stock picks. It involves identifying successful strategies of investors that have consistently generated positive returns in the past and expected to do so in the future. We then copy these strategies and tweak it according to our needs.
Cloning can be simply referred to as creating a clone or copying an investor’s investment strategy. Copying a strategy can be advantageous because it is less time consuming, is efficient and involves less fees, which in turn, shall provide better returns for an investor.
Cloning can look very simple, but it requires a lot of patience and time. Cloning as a strategy can prove to be very advantageous for those who are not involved full-time in the markets or have little experience in the capital markets.
Though we got a brief introduction on cloning, a few questions are unanswered: why should we even clone others? How do we clone? In the coming units, we will discuss them all.