You can not beat the index by trying to beat the index 

With the stock market hitting new highs in the U.S., and investors desperate for income chasing (i.e. taking more risk) large cap dividend paying stocks with average of three percent yield, it helps to get down to the basics of investing.

Monish Pabrai, a value investor that compounded at 26 percent annually since 1995 recently gave a talk at Columbia Business School, outlining his investment process.

Monish starts by not committing capital unless he can see double to triple potential in two to four years, that by itself force him out of most popular dividend paying stocks such as McDonald or Exxon Mobile.

Monish ignores the index tracking mentality, realize that real returns will be lumpy, he spends his time focusing on finding special situations worthy of his capital, which means, sometimes there will be nothing to do, sometimes you will watch the party from the sidelines realizing your opportunity will come when everyone gets sober.

Monish Structure his investment business in order to achieve outsize returns, whatever your strategy may be, if you wish to beat the market you should do the same, as Arnold Schwarzenegger said “Go heavy or Go Home,” in the investment world, go for it, or buy an index fund and spend your time elsewhere, you will not beat the market by doing what everyone else does.

Monish is not alone, Warren Buffet , James Montier and other value investors preach a similar strategy, wait for a “fat pitch”, be contrarian, look for margin of safety, capitalize on special situations with little chance of permanent loss of capital and large chance of outsize returns and accept that these will be few and far between.