Friday, October 9, 2015

What is investing for the long haul?

The answer to the articles question will sound reasonable to many investors, and idiocy to others. When we choose to invest our money we have a plethora of choices. There are so many investment companies and their agents out there trying to hawk us the best fund, or financial product to invest in.  The reality is that these funds are just a basket of underlying securities already widely available to the average investor through just about every discount online broker. So we can choose to put our money with the sales person with a great sounding idea(plus a hefty commission). But when that person decides to jump ship when things go south your left holding the bag.  Doesn't sound like they were in it for the long haul for you. Or we can learn how to do it ourselves, and it doesn't require a finance or accounting degree(although that helps).

Here I'll strive to seek out individual securities and investment ideas that will be there for me through good times and bad.  These investments are in it for the long haul.   I'd think Warren Buffet said it best

“An investor should act as though he had a lifetime decision card with just twenty punches on it.“

“If you aren't thinking about owning a stock for ten years, don't even think about owning it for ten minutes.”

I'd say he's done very well for himself by identifying companies that are built to last almost indefinitely. Now that doesn't mean one of his most famous investments, Coca-Cola, will never go bankrupt. Instead we should try to understand that there are certain companies, some of which are very unexciting, that produce great products and extraordinary profits for their shareholders. By identifying and investing in these companies we'll build our own portfolio that we can use to reach financial independence, fund retirement, and even pass down to future generations. How is that possible? Through the dividends the majority of the these great companies pay each year to their shareholders.  Over time these dividends end up as a tidal wave of cash in our accounts.  

The approach here won't be extremely analytical.  I'll look to buy great companies at great prices, or in following WB's mantra to buy great companies at fair prices too.  I'll post an analysis on each investment highlighting some of the key factors I use when deciding to purchase a company. Not to much rocket science here, but it will include a fair dose of hard work and knowledge. Buys are intended to be held at least 10 years with the idea of owning the stocks forever. If the situation changes drastically on any investment then selling will be prudent if the need arises at any time.  

You might be wondering why we don't just invest in an index fund, which is all the rage. The thing is I personally have some of my holdings in the SPY index fund, but not a big portion. Of course I want a piece of the overall action, and the dividends that come with it. But why would I want to completely settle for the average returns of what is an actively managed portfolio with companies I feel don't stand the test of time.  Maybe I'd rather own Home Depot instead of Lowes, or have nothing to do with Petsmart, Genworth, or Red Hat*.  Now these are just examples, and some are well run companies. But the fact is the index funds might not even own some of the companies that I believe  will offer superior results over time. 

Now I'm not new to investing, it's been a passion of mine since I was 12. I've had plenty of successful  and unsuccessful choices. So I'm not perfect in any sense.  I currently own stocks that I think are solid companies with great future prospects.  As a way of tracking the results I'll have a shareable spreadsheet** from Google Docs that will list the price of the securities starting  as of the close on October 7, 2015. I'll give a quarterly update, and if there are any new buys I'll put up a post and update the sheet accordingly. 

Thanks for coming along for the ride, or should I say "The Long Haul!"

* Based upon the link here
**Sheet updated and viewable 10/11/15

Full Disclosure: Long SPY. 

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