Trophy Assets
Every costly mistake I've made came from a decision. So I've been building a portfolio that requires me to make as few of them as possible.
Several years ago I read a newsletter about acquiring trophy assets and holding them forever.
Set it and forget it.
The idea resonates with me because it eliminates most of the costly mistakes I’ve made with my investments.
Buying high → selling low.
Buying low → selling early.
Every costly mistake I’ve made flows from an incorrect decision.
Which suggests something simple: we can increase our returns by structuring our investment plans to require fewer decisions.
Fewer decisions, fewer mistakes.
This isn’t just a feeling. Brad Barber and Terrance Odean studied 66,465 households at a large discount brokerage from 1991 to 1996. They sorted them by how much they traded.
The 20% who traded most earned 11.4% a year.
The 20% who traded least earned 18.5% a year.
Same market. Same period. Seven percentage points a year, and the only difference was how often they touched the account.
The title of their paper says it plainly: Trading Is Hazardous to Your Wealth.
I’m not so good with math, but an extra 7% a year for doing nothing seems like a pretty good deal.
So What Is a Trophy Asset?
The answer is probably different for everyone.
For me, a trophy asset is one I can own for years without worrying about the market price. Better than that — one where I never even think about the market price.
Until recently, two assets have met that bar:
Starter single-family rental properties
Manufactured homes
Once I’ve acquired one, the market price stops mattering. The only thing that matters is rental demand.
If demand stays strong, the asset keeps paying me every month. That’s it. That’s the whole scoreboard.
Single-family homes are honest-to-goodness wealth building machines. You get paid twelve times a year while they hold their value against the purchasing power of dolla billz.
AND you can even protect them with insurance, which is not something you can say about a stocks.
But here’s the real reason they’ve been my focus:
I can’t sell a house in four seconds by tapping my phone.
At least not yet.
The friction is the feature. Every asset I’ve ever sold too early, I sold because selling was easy.
Nobody panic-sells a rental property at 11pm.
The problem is that houses are also harder to acquire. You’ve got to scour the market for good deals, which takes real time. And prices have escalated significantly over the last five years.
Which has pushed me toward stocks — the exact place where I’ve historically made my worst decisions.
So I needed a filter.
The One Question
I’ve been using AI to help identify what I’m calling flywheel businesses.
Here’s the whole test:
Does adding customer number 1,000 improve the experience for customer 999?
A normal business makes money by selling to new customers or selling more to existing ones. Growth is addition.
A flywheel business compounds, because the value existing customers receive goes up with every new customer. Growth is multiplication.
Nick Sleep’s example was Costco. Every new member increases Costco’s buying power, which lets them buy inventory cheaper, which lowers prices for every member.
Lower prices bring more members. More members bring lower prices.
The wheel turns itself.
That’s why flywheel businesses are trophy assets.
Once you’ve bought one, you don’t have to watch the price — because you know the thing gets structurally better with every customer it adds. The reason to own it has nothing to do with what it traded for today.
A few of the flywheel businesses I’ve acquired include Microsoft, Amazon, and Nvidia.
Notice what the test does. It doesn’t ask whether the business is growing, or profitable, or cheap. It asks whether the thing is built to get better on its own.
If the answer is yes, you don’t need to make decisions about it.
Which is the entire point.
In an upcoming article, I’ll share how you can build a compounding machine designed to increase your ownership of trophy assets over time.
— Rob Minton
P.S. If you own a business, is there a way to turn it into a flywheel? Some way that every new customer or client improves the value delivered to all your existing ones?
That’s the highest-leverage question I know of to ask about your own business, and almost nobody asks it.
The investments mentioned here are examples, not recommendations. Do your own due diligence, including working with your professional team of advisors, before making any investment.