'These 3 things simultaneously increase return and reduce risk': A stock manager who's trounced the market since 1996 shares the secret sauce behind his portfolio

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Contrary to efficient market hypothesis, Bill Nygren of Oakmark Funds, thinks investors can increase returns and reduce risk simultaneously.

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Nygren stresses the importance of value, dividend, and per-value share growth. He also favors incentivized management teams that have skin in the game.In order to increase returns, one needs to increase risk. It's a truism that's older than dirt, and has mostly been accepted as an inextricable link in investing.

This makes sense in theory, but accurately valuing a company is no small task — especially in today's environment. Although this principal is inherently difficult to discern, investors can choose from a variety of value-measuring determinants, and put them up against where the company is valued today. If you find it's trading a significant discount, a purchase may make sense.

 

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