We believe there is a better way than passive indexing.  Indexing takes all comers whether the company is good or not.  By selecting only superior businesses with a durable competitive advantage and having the discipline to buy them at a reasonable, or better yet, cheap price, we believe our strategy is superior.  We think of our portfolio as a “Super” index of superior companies.

Diversification is key. Even if you own every single stock in the market, you would still be subject to market fluctuations and market risk. Simply buying more stocks will not reduce market risk, but by diversifying our portfolios, we can reduce nonmarket risk. Diversification reduces nonmarket risk such that if an investment does not work out, we do not have all of our eggs in one basket. Statistics show that increasing the number of stocks owned from just one to two already eliminates nonmarket risk by 46%, 72% with a four stock portfolio, 81% with eight stocks, 93% with 16 stocks, 96% with 32 stocks, and 99% with 500 stocks.

 So why only 15 to 25 companies? After eight stocks in different industries, the incremental benefit of adding more stocks becomes smaller. We would rather concentrate our capital on our 15 to 25 best opportunities rather than our 50th one.

LCM charges a flat 1% of assets under management fee per year. Qualified clients have the option of choosing a performance-based fee structure. Our clients’ best interests always come first. LCM receives no compensation from any of our custodian brokers, and we will invest our capital along with our clients.

Except of over-the-counter stocks (small companies), LCM clients’ stock transactions will be commission-free.**  Since our strategy is to invest in dominating businesses, we estimate that mostーif not, allーof our clients’ trading will be commission-free.

**For accounts held at Charles Schwab and TD Ameritrade. Interactive Brokers accounts may be subject to a small commission fee.