Do I have Any Wisdom?

Do you have any wisdom regarding an investing plan, your investing philosophy, or your investing practices, Wayne?

“To achieve great things, two things are needed: a plan and not quite enough time.” – Leonard Berstein. In general, I love wisdom. I don’t have enough of it and wisdom is a vital element in every part of life. It is so important that an entire book of the Old Testament is devoted to pithy reminders about what is wise and what is foolish. The book is Proverbs.

Not only does Proverbs talk about wisdom for every area of life (from communications to parenting to finances), but it also talks about planning. For example, “Many are the plans in the mind of a man, but it is the purpose of the Lord that will stand.” Proverbs 19:21 This reminds me that my plans may be made but only God can give me success if it is aligned with his purpose. That isn’t a defeatist perspective, but it is a rational and thoughtful one.

Another Reader’s Question

I’m grateful for readers who ask questions. I especially like questions that look at the big picture to understand the forest before we examine the trees. For example, Microsoft and Google are big trees and there are many other trees in the investing forest. Which trees will flourish and grow? Which ones will produce the best fruit?

Here is the reader’s question(s): “I understand that you receive ‘paydays’ throughout the year, but do you have a general theory or discipline (perhaps philosophy) that you engage in for a pattern for investing for say the year, the month, the quarter?” (Thanks, Bill – great question!)

He goes on to ask, “So, besides all the individual analysis and your goals for your money.  Do you have a general plan that you follow to invest regularly?  Or is it based on what is best after all your usual examinations?”

These are terrific questions. The answer I offer to both of them is “Yes!” Because there are really several questions within the first question, let me start with just one part of the puzzle in this post. Then, if I am still breathing when it is time for the next one, I will add some more insights to my first response.

My General Theory or “Philosophy”

First of all, I view “risk” as separate and distinct from “volatility.” Volatility is really another way of saying opportunity. This isn’t an original idea from me. Most investors want to buy low and sell high. But I want to buy at a rational price and then hold 95% of the investments I buy. So my philosophy is investing with a long-term perspective or “Buy and Hold.”

I read one illustration years ago from one of the monthly newsletters I used to get that wise investors want to focus on hitting a lot of singles and maybe an occasional double. They aren’t swinging for the wall to get multiple home runs. It is far easier to get four singles than even one home run when it comes to baseball and investing.

This means 1) I need to stay in the game. Therefore, as dividends arrive, I am looking for an opportunity to add to existing holdings. Because enough dividends arrive monthly, I want to review our holdings at least weekly to see if I can add more shares to lower my overall cost basis. But that isn’t all.

This means 2) I am not running all over the field swinging multiple bats. I want to have a focus on the investments that meet my criteria. My criteria can best be stated in this sentence: “I want an investment (stocks/ETFs) that pays a good and growing dividend that is supported by growing sales and profits.” There are other pieces to this puzzle. I’m not saying all of our investments have to pay a dividend. However, having a focus keeps me from chasing the various winds of “the next best thing” that can be a distraction and dilute the chance of success. Keep your eye on the ball.

Why Monthly Instead of Quarterly or Yearly?

When it comes to frequency, I believe monthly investing activity is good – and weekly is potentially even better. This does not have to consume a lot of time and attention. By setting alerts on positions I can get a text message or email from Fidelity Investments that provides a hitting opportunity. I don’t always have to be standing in the batter’s box waiting for the next pitch.

The other reason weekly or monthly is better is that it is too easy to become complacent and forget that this is a discipline, not just an event. That is why the name of my blog comes from Proverbs 27:23-24.

In King Solomon’s days wealth was measured in the cattle head count or number of sheep. The proverb says to “know well the condition of your flocks and give attention to your herds.” When it comes to sheep and cattle, they need daily attention and protection. Thankfully, stocks, ETFs, and other investments can be left untended for a couple of weeks without any harmful effects or dangers.

This may cover the questions sufficiently. However, I will give this some more thought before I close this response to Bill. Bill, do you have any follow-up questions? Thanks again for asking!

All scripture quotations are from the English Standard Version (ESV)