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Investment Philosophy



August 03, 2011 – Comments (0)

Board: Apple

Author: DanishInvestor

Ever since goaltender asked dsbrady about his investment philosophy I've been scratching my head and thinking about my own. The former (goaltender) adheres to value and dividend stocks, and the latter relies on "gut feeling" and not trading very often to avoid expenses.

FWIW, here are the main principles I try to follow. I'm aware, of course, that even the principle of having principles belongs to the realm of logic which is beyond or beside the realm of the stock market.

1. PATIENCE: This can be a euphemism for laziness or the more dignified LTBH, but is basically this: Buy good, solid companies with a proven track record and go to sleep for a couple of decades and you will be rewarded. All - and I mean all - analyses tell us this is the most profitable approach. I have done this with AAPL and you know the rest.

2: STOICISM: In this investment context I guess it means: don't get emotional or panicky or even worse: impulsive. Or as the saying goes "Don't fall in love with a stock. It doesn't love you back!" I must admit though that it's hard not to have amorous feelings about AAPL :) I'm a smoker, but that's not why I have been satisfied with the performance of, say, PM. This is cold calculation - and nice dividends.

3: DEMOGRAPHICS: Investing is always about the future. And surprise: we DO now the future. It's already been born - it's here. I'm talking macro-demographics. Where are the ascending middle-class consumers who will, and are able to, buy the products companies (and their stocks) make? Not the old world, but the new Asian one. For some years I've invested in Chinese stocks (BIDU, NTES, ZNH and others) and they have been good choices so far and I'll be buying more. Where else are people getting richer and wanting to become more like us Western materialists? (as if that is making us any happier): Indonesia, Brazil, Thailand, Malaysia and others. Or as they are commonly known: emerging markets. I have ETFs invested in the four mentioned countries (IDX, BRF, THD, EWM) and they perform nicely. Some of them even pay hefty dividends.

4: SERENDIPITY: That's not really a principle. It's sort of unintended luck, or as Horace Walpole coined the term in 1754 about a fairly tale where heroes “were always making discoveries, by accidents and sagacity, of things they were not in quest of.” In other words, you stumble upon a stock by accident and it turns out a winner. In my case it's been an obscure Texan oil company LUFK and a South American airline stock CPA (cf. principle 3 about emerging markets).

Misses and losses? Oh, quite a few, especially when I was dumb enough to play the smarty, convinced I could time the market! No way. I manage my own portfolio of 500k, but (unfortunately) not my employer-funded retirement account of about the same amount. They suck. I could do better :) Hey, you gotta have confidence, right?

PS: I don't live in the U.S., although I spend a lot of time there, so the currency issue plays a big role. Every time the dollar goes up or down a few cents my portfolio is infected or cured, or both. Today - and you wouldn't believe it with the bloodbath on Wall Street - the greenback is UP. So that's principle 4 for you :)

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