I’m a Rule Breakers subscriber and have also enjoyed the collective wisdom of the community that frequents Saul’s board. I’m wondering what you all would think of my portfolio, particularly with an eye toward my age and the many years I have ahead to adjust for mistakes and make back lost money.
I’m 26, been investing 3 years. I would consider myself pretty risk tolerant.
Since September 2015, I have a total return of 62.5% (adjusted for commissions but excluding dividends) against the S&P’s 46%.
What do you all wish you would have known/done when you were my age? Please help me learn!
I know the most successful posters on this board make use of a “modified buy and hold strategy,” but I also want to train myself to be a long term investor–I envy the way some folks tout that they’ve held stocks for decades and decades. Being as young as I am, I realize I have a chance at that, and so I’m hesitant to sell some of the positions I started with.
If I have any question about the below holdings its maybe that I wonder whether to sell my relatively large Amazon.com position and put that into something(s) more aggressive–perhaps something that I already own?
Enphase? I added to my position after it took a hit recently. Excellent and popular product, with a better one on the way, and improved finances that are continuing to improve.
Micron? Two mints in one - an underpriced growth stock whose numbers also say value stock. This is very rare in the current market. It depends on whether you believe that the memory chip cycle isn’t peaking (because demand is very strong and growing, and they aren’t overbuilding manufacturing capacity), and that their new products will continue to do well, or will do well when they get introduced.
Oh no, an invitation for anyone older than 26 to offer advice!
What do I wish I would have done/known? Put more attention into becoming a great investor. Since I’m not a great investor, but have done ok, thats a work in progress.
What does ‘becoming a great investor’ mean? For me, it means having enough of a clue that I can start the next Saul’s Investing Discussions. This means spending (a lot of) time learning from Saul and others to try and understand how they think about investing (its interesting to contrast), and start to see the types of patterns they see.
He could be right or wrong about them, but if he’s wrong, he can look back and go… “huh, I thought X but it was actually Y” and learn for the next time.
On a more practical note, get in the habit of saving as much as you can without being cheap. The world is organised to separate you from your money.
Maximise your three wealth buckets in the following order.
Health > Time > Money
When you’re younger, time can be swapped for money, but you should be looking to flip these back as soon as possible.
Since September 2015, I have a total return of 62.5% (adjusted for commissions but excluding dividends) against the S&P’s 46%.
You beat the S&P 500 by 50%. You list 30 stocks, that’s 6% of the S&P 500. I you want to beat the S&P 500 by more than 50% you have to reduce the portfolio getting rid of the laggards.
They say that around 12 to 20 positions is sufficient for diversification. You can safey prune half your positions. I currently hold eight stocks, one in finance, one in healthcare, one in transportation, four in high tech, and one Internet ETF.
At 26 I watched my dad looking at the stock page in the paper in the evening and taking notes on 3 by 5 index cards. I thought that was the most boring thing an adult could do. I was well over 40 before I started investing. That was not quite 40 years ago. Investing is the most difficult and most challenging thing I ever attempted in my life. Learn from the masters, Peter Lynch, Warren Buffett, Jesse Livermore (speculator), TMF, Saul but beware of free advice on the web, not everyone is your friend.
Congratulations on getting rid of debt except for the mortgage. Debt is one of the greatest dangers to your wealth. Aim for a sturdy portfolio over an efficient one, there are plenty of fast growing but safe stocks to build a sturdy portfolio with. For Saul specific advice go to the knowledge base on the right panel ----->
A good way to become a buy/hold investor in your position I would say is max out your 401K/403B e.g. if you can get to at least 15% of your salary. Many companies allow over-subscribing to that if you ask to let you give up to the IRS limit of about 18K/year.
They usually have limited investment options so its not tempting to jump it in and out of hot stocks so that is good training for a long term mindset. I would recommend you look at a target retirement option there if your company has it. e.g. target 2055 retirement fund, set and forget.
Then set up a ROTH IRA and give that as much as you can up to limit of $5,500 / year and that can be your trading account for better tax treatment on gains.
If you are not on a career path to be able to set aside 18K/year to 401K and $5,500 to ROTH that is really understandable, especially at your age. Many good careers have modest pay especially starting out. But consider either taking classes to further your career or starting a side business so you have more money to work with.
As for the stocks, I won’t comment on quality but one thing many will say your 27 stocks is way too many especially if you are holding positions less than $1000. Try to cut out 2-4 now with goal to get down to 10-15 in your trading portfolio.
Good luck, you are farther along than many your age, I’m sure.
As others here suggest, you might wish to prune some of these stocks. I actually have a few more stocks than you but I’m planning on cutting some as well.
Some of the smallest positions might need to go. If they’re only worth about 1% or less, they probably aren’t worth keeping.
I like a lot of your stocks but not all of them. I would try to go back back and reevaluate each one and maybe rank them in order of higher conviction and lower conviction. The ones at the bottom probably should be the first to go.
Aim for retiring at 55 (or sooner). Traveling, sports, recreation are so much funner and easier pre-70. Learn Spanish.
Your biggest hindernce is going to be health insurance pre Medicare age. We’re talking a fortune that hopefully you can make enough on these boards to cover. Otherwise, move to Mexico or Costa Rica like my friend Rob Evans: $2,000 a year for health insurance for 2.
In other words don’t get tied down to one place on earth. Did I say learn Spanish?
I’ve been following the fool since around 98, and I’m 35.
I would really would do the following:
Pay attention to the rule breakers podcast. Buy companies that reflect who you are. Hold through hard times- that’s a really tough lesson to learn. avoid the knee jerk reactions. Bad times will come, the market goes down, but it goes up way more than it goes down. Reinvest in winners who’s investment thesis hasn’t changed.
Don’t focus on highest gains possible, just “good gains.” You end up chasing dragons and getting jealous. Dont do it. Just don’t do it. Thats how people end up buying the latest and greatest technology and can’t explain wtf they do (like, say, Bitcoin or biotech).
Learn your lessons and learn from the boards- but dont get too attached to any one board. This board is great, but I’ve seen many boards like this come and go during hard times or when the “leader” disappears. Anyone remember the Fab15 & friends? Might as well have been Saul. Learn the lessons but do not become dogmatic. Dogmatic thought process generally tends to come crashing over time.
I am much older (54) and have significant dollars in the stock market, but cannot understand how I’m supposed to have 11-14 positions. That means I would have position sizes exceeding $400,000. I currently own north of 70 stocks and segment them based on growth,value, and dividends. Of course, the growth portion of the portfolio has significantly outperformed the other two stock categories, but as someone that doesn’t believe in bonds I’m struggling with the level of concentration discussed on this board. I plan to retire in the next three years and will need to live off of my investments, that is why I have started to move into solid dividend paying stocks. Also, if you look at the history of the stock market most long-term gains are the result of dividends. I would like to hear other thoughts how to manage this. I plan to keep two years worth of living expenses essentially in cash when I retire. Love the board and especially Saul, Tinker, Denny, Chris and others that spend so much time educating the rest of us.
If they’re only worth about 1% or less, they probably aren’t worth keeping.
Even if you are lucky/smart enough to get a 2 or 3 bagger, the return on a 1% holding is not much money for most of us. And despite what you may sometimes read here, the game is about dollars not percentages.
You might make an exception just to try a company on for size, does a very investment make you feel more or less comfortable for the next week two? As others have said, what you sell does not count, only what you buy with the money, and whether it goes up or down.
I might suggest that some of the reason that people have very large numbers of stocks in their portfolios … other than those who have disciplines like buying a little of each new SA or RB recommendation and the like … is intended as a kind of insurance against making bad choices. I.e., a choice that only makes 10% gain does help take the pain out of something that loses 50%.
While I understand this, what it misses is the use of index MF/ETFs as a part of the mix. That gives one a more stable, more predictable, if less spectacular base against which to take risks with a part of the portfolio. And, without the crapshoot/confusion of trying to keep track of the current prospects of 50 companies.
Hi Maestro, If I was you I’d start with reading the Knowledgebase which is linked to in the right panel on this page. Read all three parts and then re-read them twice over the next year. (There’s some info that’s outdated but it’s the kind of guidance that I sure wish I’d had when I was 26.) Then below the KB there are some other (much briefer) posts which give good advice for investing and which received lots of recommendations from the board. That will get you started.
Welcome to the board,
Saul
That means I would have position sizes exceeding $400,000.
That is an arithmetic fact but what is the problem? What is the objection?
Portfolios have to fit comfortably like good shoes. I’ve written elsewere that if you need $50,000 to live on and you have a half million dollar portfolio it has produce a 10% return plus something for inflation but with a five million dollar portfolio it only has to produce a 1% return. Clearly that will affect the composition of the portfolio. A 26 year old who has just paid off his student loans is not likely to have the five million dollar portfolio.
I currently own north of 70 stocks and segment them based on growth,value, and dividends. Of course, the growth portion of the portfolio has significantly outperformed the other two stock categories, but as someone that doesn’t believe in bonds I’m struggling with the level of concentration discussed on this board.
If growth has “significantly outperformed” why not sell value and dividends and reduce the count to 35 positions?
I plan to retire in the next three years and will need to live off of my investments, that is why I have started to move into solid dividend paying stocks.
Just because the company writes you a quarterly check does not mean it’s the only way to live off your portfolio sacrificing returns. Alternatives like selling covered calls and selling a few shares will do as well. Capital gains taxes might be lower than income tax on dividends.
Also, if you look at the history of the stock market most long-term gains are the result of dividends.
The stock market evolves. Do dividends still create the most gains? You just said that growth beats dividends!
“Alternatives like selling covered calls and selling a few shares will do as well.”
Can you please direct me to the TMF Boards where I can learn about getting a regular income using options, like covered calls. This may be better than investing in dividend stocks like reits, bdcs, mlps etc which may have low or no growth.
Many thanks for your prompt reply. I have found a couple of boards on TMF and am also reading articles on Fidelity which hosts my portfolio. I will try google as well.
Getting a ‘good’ income with low risk may not be all that easy (at least, Fidelity seems to think so) but I wish to explore the strategy as I would like to keep my current growth stocks (which have done quite well as many of them are the same ones discussed here), and perhaps even switch some of my income stocks to these growth stocks as the present investment climate seems to favor them. Since I retired nearly 15 years ago I have been using about a third of p/f for income but will like to review this strategy in view of the recent investment experience.
What do you all wish you would have known/done when you were my age? Please help me learn!
The most important lesson is to develop a regular saving program early on and stick with it. Increase your savings rate at every opportunity. If you get a raise or a bonus, make sure some of that money goes into your saving program.
Then review performance of your investments and constantly work to improve returns. In time you will learn which opportunities work best for you. Follow through and do more of the same.
Don’t forget to explore for new opportunities with part of your funds. Perhaps you will find rewarding new paths to success.
I am much older (54) and have significant dollars in the stock market, but cannot understand how I’m supposed to have 11-14 positions. That means I would have position sizes exceeding $400,000. I currently own north of 70 stocks and segment them based on growth,value, and dividends.
I too have this problem. I cannot imagine that any successful investor would limit his holding to 11 positions. It might be ok if they are mutual funds or etfs. But if stocks 10% or larger positions is too concentrated for most of us.
I use a three tier system for 30-35 stocks. Small initial investment, typically about 3% of portfolio value, followed by additional purchases for ones that perform as expected. Some good performers can touch the 10% range, but rather than rebalance I’d rather work on improving returns for the rest of the portfolio. Sell the underachievers and reinvest in something better.
To me investments less than 3% are a sideshow. Probably not worth the trouble. Their performance is rarely significant to the bottom line. Better to add small sums to existing holdings.
I too have this problem. I cannot imagine that any successful investor would limit his holding to 11 positions. It might be ok if they are mutual funds or etfs. But if stocks 10% or larger positions is too concentrated for most of us.
Er…many of us on this Board limit our holdings to 11 positions (or less) and are successful investors.
That said, of course each individual should decide for themselves how many stocks to hold.
