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Sharing 30 years of investing experience and how my approach has evolved. TLDR at the bottom, but I thought the details may interest some of you.
I started with no investing knowledge and no money. I got my first real job in the late ‘90s and invested whatever I could. Everything I’ve learned came from reading, making mistakes, and living through some brutal market cycles.
Got crushed in the dot com cycle, again with the financial crisis. Discouraging but it didn’t matter. Kept buying the index. Never sold. Understood it’s a long game.
It was 12 years until the S&P was back to where it was in the late 90s. That period and the rewards that followed taught me that discipline beats emotion.
COVID era investing opportunities changed my investing process. I was in a different place in life. I’d done well, and had built enough of a foundation that I could invest differently with part of my portfolio. About half still sits in index funds, bonds, and cash. That’s intentional. It means I never have to sell because I’m scared or need the money.
With the other half, I don’t try to understand hundreds of companies. I know maybe 8-10 really well. Businesses with durable competitive advantages that I think will still matter a decade from now. I know their earnings, valuation ranges, risks, and what usually causes the market to overreact.
Then I wait. When one gets hit but I don’t think the long-term story has changed, I buy. If it gets cheaper, I buy more. I’m not trying to pick the bottom. I’m building positions at prices I’m happy to own.
Amazon, Google, Apple, UnitedHealth, Waste Management, and Chevron have all been examples.
The key isn’t what I buy. It’s when I buy.
I buy when sentiment is ugly and I think the market has temporarily mispriced a great business. Google is a good example. The business performed about the way I expected. The market’s expectations were simply much lower than mine. I loaded up 2-3 years ago. My analysis said worst case was priced in, and the upside would be big if others were wrong. Wall Street money has different purposes than mine does. I’m happy to be off by a little but own a great company at a good price. I don’t care if my short term return was better somewhere else. I can’t boil the ocean. I just follow 8-10 at a time.
UnitedHealth was different last year. I thought the market had overreacted, built a large position, made about 60% over the following year, and moved on.
When valuations become stretched and expectations start pricing in perfection, I’ll trim or exit. I’m happy paying taxes if the thesis played out. Then I wait for the next opportunity.
This approach has materially accelerated my wealth over the last six years and materially outperformed simply buying the index over that period.
Some companies I own and will own “forever” but I cap them and trim to what I’m comfortable with. Others, if my thesis changes, I drop them off my list.
The edge is studying a small number of businesses deeply, buying when fear creates a disconnect between price and value, trimming when optimism becomes excessive, and having enough of a margin of safety that I never have to make emotional decisions.
What if it all goes to💩 tomorrow with my 50% stock pick portfolio? I am so far ahead and have taken so much cash out of this strategy that it still wins. And the S&P index is fairly concentrated with mega tech making up 30 to 40% of it. My concentrated bucket is essentially a barbell between defensives and blue chip tech companies. I sleep fine. If there was a 50% crash, I have 35% cash to weather the storm and opportunistically buy or add to positions. My cash bucket ranges from never more than 40% to never less than 10%. When I can’t find opportunity, I’m closer to 40 when I see opportunity. I’ll step forward closer to 10.
TLDR, Don’t bet the farm, use an S&P index as the foundation, or for all of it it depending on your risk profile and place in life. But if you choose to stock pick with a portion - Know a few great businesses extremely well. Be patient. Buy fear. Trim optimism. Repeat.
All the best.
EDIT - my stats as many asked about:
I am very detail oriented by nature and have tracked my personal finance details since the beginning.
Lifetime about 13% annually versus about 10.5% for the S&P 500 and about 8.5% for a traditional 60/40 portfolio. Last 6 years that I’ve done this, about 27% annually versus about 17% for the S&P 500 and about 11% for a traditional 60/40 portfolio. 2026 YTD is 34% versus about 9% for the S&P 500. The last 6 years have been unusually favorable for my approach, so I don’t expect that to continue indefinitely.