Key Strategies Learned From A Lifetime Of Investing
Inside today’s Daily Journal…
Essay: 8 Lessons From 30 Years In The Market
Big Tech goes all-in on data centers
Alphabet and Amazon get a sweetheart deal
ExxonMobil reports a strong quarter
Chart Of The Day… Apple
Today’s Mailbag
Editor’s note: Today, Porter is turning the Daily Journal over to Emmet Savage – Emmet is chief investor and co-founder of the research firm MyWallSt. He has been involved in the stock market for more than two decades, with an independently proven annual return in excess of 24% for the last decade – more than triple what the S&P 500 returned.
Recently, Porter traveled to Ireland and sat down with Emmet to uncover how he explains his success. Watch their exclusive interview here… It’s a conversation you don’t want to miss.
Here’s Emmet…
If time in the market beats timing the market, my three decades of experience should hold some weight.
In 1996, a week after my final university exam, I started my first full-fledged permanent job, a role that kept me in front of a computer screen all week long. My interest in stock investing was well-established at that stage, but the internet was in its infancy. This alignment of my passion and access to a revolutionary new tool marked the beginning of a new era: with little effort, I could keep an eye on the stock market.
Six months later, in early 1997, Yahoo! Finance was born, and The Motley Fool became available outside the U.S. Around the same time, I opened my first online brokerage account and, from that point on, transferred all of my monthly savings to the U.S. for investment.
Jumping forward, and by the close of 1999, Dell’s 10-year share price had increased 1,600-fold.
I couldn’t believe it: the very brand of computer I was glued to all day had generated unprecedented returns. Between this realization and the excitement of the dot-com bubble, which I was caught up in, I was entirely captivated… an investment in just one up-and-coming Dell would change my life. I embarked on a mission to identify and understand the characteristics of businesses poised for hypergrowth – and committed to investing in as many of them as possible.
Subsequently, when the bubble brutally popped, unlike the majority who suffered severe losses, I kept going. Here are eight lessons I have learned along the way.
Most world-changing companies stay flat for years or decades before massive growth. Amazon (AMZN) had a 10-year flat period from 1999 to 2009, but a total return from its early days of 275,000%. Apple (AAPL) had a flat period: 1980-2000, but a total return of more than 200,000%. Microsoft (MSFT), flat period: 2000-2013, but a total return of more than 400,000%. This trend in great investments is so common that it’s hard to find exceptions.
The first several years of stock investing are grueling, often delivering one paper loss after another. As most commercial aircraft have a takeoff distance of about two miles, most portfolios need several years to begin to soar.
A portfolio of 20 to 30 stocks is optimal for retail investors (that’s us). As you expand to 40 or more, your portfolio increasingly resembles an index, reducing its ability to outperform. Furthermore, the beam-width of your attention is limited, so tracking scores of businesses is unfeasible over the long term.
Your most regrettable decisions are likely to relate to stocks you used to own, but sold too soon. I took $8,239 off the table in early 2009 by selling MercadoLibre (MELI), a stock that has since increased 50-fold. That’s nearly $500,000 in lost gains, due to selling on a whim. Had I bought every stock precisely when I sold it, my 25-year compounded annual growth rate would have been almost 2% higher. David Gardner, co-founder of The Motley Fool and possibly the greatest retail investor since the 1980s, found the exact same thing when he conducted a similar study on his portfolio. Sell with the greatest of reluctance.
Consistent investing at set intervals eliminates the most challenging aspect of investing: market timing. More importantly, you harness the benefits of dollar-cost averaging.
This is not a one-sided bet. It is, however, unidirectional – meaning it is limited in one direction but not in the other. Assuming you are not using leverage, the most you can lose in any investment is exactly what you invested. The upside is uncapped at 10-fold, 20-fold, or, in Dell’s case, 1,600-fold.
Poor decisions are common in stock investing. It is crucial to learn from mistakes but not dwell on them. The dot-com bubble taught me the importance of this, and I haven’t lost sleep over a could-have-should-have since.
One good investment can change your life. Just one. And that, I think, is why we’re all here.
Emmet Savage
MyWallSt
Tell us what you think: [email protected]
P.S. Porter and Emmet talked about these and other lessons when they sat down on camera during Porter’s visit to Ireland last month. The video of their conversation is coming down TONIGHT… so this is your last chance to watch it. Go here now.
Porter Stansberry
Stevenson, Maryland
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