Ken Kam's Best Ideas Blog

Waiting for the "fat pitch," is how Warren Buffett compared investing to Ted Williams approach for hitting a baseball.

Ted Williams is arguably the greatest baseball hitter of all time. In his book, The Science of Hitting, Ted Williams describes how he mapped the strike zone into 77 cells the size of a baseball. He knew his batting average in each cell. He would avoid balls in his worst cells, even though it was a strike and aggressively go after the pitches in his best cells. That's how Ted Williams became such a great hitter.

Ted Williams' "cells" are similar to different types of investments: strategies, situations, profiles or scenarios that you can invest in. For example: small-cap technology growth stocks or companies that generate transaction fees on mortgages. These are the investing zones that you should evaluate your performance on. The zones you have a track record of successfully investing is where you should focus and look for your "fat pitch."

Marketocracy has a number of tools that can help you identify where your investing zones are; but here's a new one that I think you'll find interesting because it is easier and quicker to calculate. At the end of the day investors want to make money. So, let's calculate where you've made money and compare that to where you're currently invested.

If you're managing a stock portfolio at Marketocracy - you can download a file of all the positions you've ever traded in your portfolio. Under your portfolio's Stratification Report, check: ( ) Show All Positions and then Download the data file.

Sum up and calculate the percentage of your gains by sector or industry and by market cap (see Table 1). This investor has five zones that they've made most of their money in.

Next, sum up and calculate the percentage of your portfolio's value by the same sectors or industries and market cap. This is where your portfolio is currently invested (see Table 2).

If you're currently invested in the same gain zones you made money in, then you're investing in your zone. The investor in the above example is investing in their zones of Consumer Discretionary and Info. Tech.; but they are investing outside their zones in Financials.

When Ted Williams saw his "fat pitch" in one of his best cells he got a lot more aggressive swinging the bat. When you see a investment that is in your investing zone, you should have the confidence to not only step up to the plate, but to go after it aggressively.

The more experience you have in successful investing in a particular investing zone the more confident you should be when you see your "fat pitch." Marketocracy gives you the opportunity to practice investing and to find your investing zones without risking your own money.