March 30, 2017

The coffee can portfolio approach to long term investing

The coffee can portfolio approach is very simple yet extremely powerful: invest and forget.

Invest with a long term view i.e. 10-20 years. Buy whenever a good stock is available at a discount but do not ever sell it.

Invest in any business which you understand and are comfortable with it for long term.

Spread your risks over 20-30 stocks (I prefer 100 as I am dumb).

Sell only when you need the money. My note: spend atleast half the money... no point in living poor and dying rich.

When buying at a discount, the situation is like going to a sale where something is available at 20-30% off the regular price. You never buy clothes or mobiles just because they hit a new high!. You rush to buy these when are they are at discount.

Statistically, some investments will become duds (downside is zero) but some few will significantly outperform the broader market. This is where the power of compounding will kick in.

Of course, some people will have the view 10 years or 20 years is too long. But people should remember whether you invest today or not, 20 years will anyway pass.

Here are some links for further reading.
- the original paper on coffee can investing (pdf)
- Value Research article
- Ambit Capital paper on coffee can portfolio in 2015 and 2016

And before I forget, open an account with any brokerage like Upstox or Zerodha where delivery charges are ZERO. 

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