And for mr mustach, he only buy diversified index funds. So not much of a strategy either?
It's a pretty powerful strategy. One of several that exist.
Anyone who tells you one solution is definitely better than all the others is going to wrong sometimes. A key factor is that any strategy is likely to be more effective for some goals than others. Your own goals have internal conflicts, as many of us do. You stated earlier that you want
My goal are simple.
- Preserve capital / purchasing power. (Ie. Inflation OR deflation)
- Grow my portfolio, ideally from winner stock but I can do with index as well if I can't find anything I like
"Preserve capital" is complex because different tools work in short timeframes versus long. In a short period such as 3 months, cash works great, much better than stock or gold. In long periods like 3 to 6 decades, an all stock portfolio could be very strong at preserving purchasing power. In the US, it's worked better than nearly everything else for timeframes that long. "Diversified index funds" can reasonbly be expected to be much better than individual stocks for the purpose of preserving capital, so MMM's strategy proves quite good for your goal if you plan to live that long.
"Grow my portfolio" is complex too, because many options exist that attempt that goal, and many of them have plausible rationales. Even deciding which options worked best in the past is tricky because the answers depend on which timeframe you choose. Projecting future returns is even trickier.
Trying both goals at once? Even more complex, of course! There's usually a trade-off between long term growth vs short term capital preservation. Longer term, disputes arise among numerous well informed people about subtler tradeoffs, but they exist too, meaning no one has an absolutely certain answer, they just think they do. MMM's strategy is one of several very good ones long term, if you can stand the ups and downs - and if you can keep calm enough to leave it alone for many decades.
A lot of gurus confidently offer solutions. The best answer depends on your individual goals and situation. MMM's personal solution is good for people who have spending flexibility, will be living for many years off the income, and are comfortable seeing their portfolio values fall for weeks or years while spending their life doing other things.
To understand other options, keep reading. One place you could read is portfoliocharts.com (looks complicated, does great job explaining different investments, has calculators showing how different investment combinations have done in the past; shows examples of investment portfolios that generally try to solve the preserve-but-grow puzzle). There are several charts there that measure the tradeoffs based on past results, while offering reasonable consideration of what the future might bring.