Settle Down and Marry a Nice Stock

Most investors have horror stories from their early trading experiences. I certainly do.

My weapons of choice were trashy penny stocks and 10x leverage.

No, my investing career did not begin in a blaze of glory. But the truth is, almost nobody’s journey does.

For better or worse, mistakes are how we learn.

A Glimmer

Before my writing career, in the early 2000s, I ran a one-man marketing consultancy. My specialty was building Google advertising campaigns for small companies.

It was a nice little business. And I got to know Google’s systems very well. They had a truly revolutionary product, and most people didn’t realize it.

Google IPO’d in 2004 at a split-adjusted price of $2.13 per share. I ended up buying in 2005 at around $5.25 per share.

As the years went on, I bought more Google on dips. I knew this company was going to be a monster, because I worked with their products every day. I fell in love with GOOG.

In the end, I held onto those Google shares for 15 years, selling (too early) in 2020. At one point Google was over 60% of my portfolio. But that was fine, because I knew the company inside and out.

This is what I mean by “marrying” a stock. You buy a company you understand deeply, and add to it on dips. This is the ideal stock market relationship.

Warren Buffett famously said his ideal holding period for an investment is “forever”, and the older I get, the more sense it makes.

Lessons

After those first few years of “investing”, I had to stage an intervention with myself.

I looked at the results from my IRA (long-term) account and compared it to my trading account. The difference was stark.

One was growing steadily, and the other appeared to be some sort of black hole for money.

Truth is, I had no business trading back then. I was in my early 20s and didn’t have the knowledge, patience, or skills required. This is the biggest mistake investors make, especially new ones. Frequent trading by amateurs almost always leads to account implosion.

For the next 7 years, I didn’t trade at all. Only long-term investments. And it worked.

Eventually I started dabbling again with trading, but with caution and strategy this time. Here’s how I maintain balance these days.

A Smarter Path

In 1960, the average holding period of a stock investment was 8 years and 7 months. Today it’s just 7 months. Almost nobody holds investments long-term these days.

This is one of those times where it pays to go against the grain.

I believe that the core of every portfolio should be long-term positions.

When you hold investments for long periods, it gives them time to compound without taxes constantly interrupting the gains. And it removes human emotion from the equation, which is a great thing in the investing world.

About 83% of my portfolio today is in long-term investments. The other 17% is cash, which I use to fund occasional trades. But an individual trade is never more than 1% of the total, and usually far less.

Regarding “long-term” investing, some of you are thinking “I don’t have that much time to wait”. I understand. Inflation is problematic, the job market is terrible, and the future uncertain. A lot of people have catching up to do.

But don’t go out and risk everything on half-baked ideas. If you’re determined to trade, take advantage of the experts we have here at Paradigm Press.

We have world class traders here, and they’ll make your trading journey far more enjoyable. Attempting to do it on your own is going to be tough sledding. The tuition to become a successful trader on your own is steep. Most people never make it.

But don’t forget about the long haul part of your portfolio. Statistically, that’s where most of the magic happens.

This week we’ll discuss which stocks I consider to be marriage material today.