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 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.
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.
Ai is so good it's hard for me to tell if this is an ai slop writeup. the "Its not a, its b" format im getting sus. Info still makes sense though. agree on the part of sticking to a small circle of competence doe
I did speak my story to AI to get a first draft and then edited it for the post. It’s my words but am taking the free help these days.
This is not AI.
Good writeup. The bit people will copy is the '8-10 businesses, buy fear' part. The bit they'll skip is the 35% cash and the fact you'd already taken enough off the table that a crash doesn't actually scare you. That's the piece that makes the rest work. Without the buffer and the temperament, 'buy when it's ugly' just turns into catching a falling knife with money you needed. The stock picking is honestly downstream of the liquidity and the psychology.
The 35% cash is the whole ballgame, everyone wants to be a vulture but forgets you need dry powder and a stomach that doesn't flip when everything's red
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I agree, but failed to mention that I shift my weight based on sentiment. When I can’t find value, I’ll be 60/40. When things are cheap, I’ll go as high as 90/10. Either way, liquidity to weather the storm is key b
Same. My biggest regret is not going more into stock picking. I put only about 10-20% of my investments into individual stocks over the years and it’s averaged 45% CAGR over the last 10 years. Including the 2020 COVID lockdown crash and including the 2022 crash. If I invested more in individual stocks I would significantly wealthier today
would u still say the same if the market hadn't had such a long bull run as it did?
People that pick individual stocks end up underperforming the s&p 500 not because the stocks don’t end up eventually over-performing, but because of investor behavior. Some examples A stock has a good run, but you don’t lock in profit. You wait and end up giving back gains. A stock starts to perform poorly, you’re suddenly down 40% on it, everyone is saying it’s shit, so you end up selling at a loss. A stock has a great run and you lock in profit. Now your subconscious gets confident or doesn’t mind taking on more risk with all your new profit. Suddenly your subconscious gets confident and you try to repeat this move, except failing this time and giving up those gains. With stocks, typically there is more management needed in your portfolio. Some people don’t want to keep up with individual company progress or constant short term capital tax gain if you take profits very early to avoid the mistake in example 1. The s&p 500 gives you a lesser return in exchange of saving you from hassles and investing psychology mistakes.
Honestly I think you made the right decision. Individual stock picking is extremely difficult and a lot of people lose a whole lot of money on it. You're way better off just buying broad market ETFs
I missed the dot com and financial crisis bloodshed. I started investing shortly after the financial crisis, but I did endure Covid. There were times I was glad when the weekend came so the market would close. I didn't sell anything. Unfortunately, I only added to positions that dropped below my cost basis, which was Prudential and Philip Morris. Being disciplined and not succumbing to fear were my biggest achievements, and what changed my results as an investor. Now I only add during fear.
doing all the above after 1 year. Thanks to many bits of advice etc people post here and other subs. Buying in times of fear for undervalued companies. Recent examples; EasyJet MSFT Google
Stock picking gets a bad name on Reddit mostly because of people who don't know to sell parabolas and like to "value invest" stocks that are making 52 week lows.
It's mainly just a bunch of people regurgitating "you can't time the market" because they tried blindly and failed with no experience / strategies.
Here’s a guy who accidentally beat the market during the biggest bull run in history, and now he thinks it’s more than luck and that most people should do the same. You just got lucky. People much smarter and far more experienced than you can’t consistently beat the market over the long run, but hey you do you.
I do not think that at all… Added my stats as an edit to the post just now.
There are people that DO consistently beat the market, it's just that most don't. I think OPs strat is sound, I don't think you should automatically assume they will mean revert over time. I've learned that in investing smarter often doesn't mean better performance. Just look at the Situational Awareness guy. The market get pricing wrong all the time short term, OP is just using their research to take advantage of short term mis pricings.
I am smarter than the market. I bought the google dip. I bought the AMD dip. I bought the MSFT dip. I BOUGHT THE GME DIP. I AM SMARTER. No i will not post my loser stocks.
I have been investing for almost 20 years using a similar methodology and it is actually hardest to beat a narrow bull market because of the outsided returns in a few stocks. I was only able to beat the market in the past year because I had MU (which was a screaming buy after tariffs). In a bear market, you just pick up good companies on the cheap which typically have a floor around actual cash flow versus money losing spec stocks.
I remember thinking I was the most savant trader because I traded after 2020 when everything was recovering and had no idea what i was doing
What is your personal yearly average rate of return?
See post edit
Holding 35% in cash creates a massive hurdle rate drag against the equity risk premium over full cycles. When your picking bucket holds 8 to 10 mega-caps like GOOG or AAPL, it doesn't add much diversification since you're just doubling down on the top 30% concentration of the S&P core. The hardest part of this setup isn't buying fear. It's maintaining margin of safety discipline on exits when multiples expand past historical norms. Without mechanical trim targets, cash drag eats into the excess return generated from stock selection.
You are correct… I’m 35% cash right now and when people panic I’ll deploy it but I’m never less than 10% cash which for me is enough to whether a storm for 4 to 5 years… And then I have a Bond bucket beyond that if I ever needed to… And plenty of unrealized gains… It comes down to liquidity and manual trims.
Thanks👌
I’m too cowardly to put too much of my portfolio, but did some similar trades. Made 70% on UNH myself, but closer to 5% of overall holdings. Bought in August last year with the buffet news, and had a few scares With it dropping even further with some 10%+ drops. Held on and up 70% for a one hear return is pretty awesome. Bought a small amount of MSFT as well and up 25% on that over 2 months. Will probably take those gains here soon and back to index.
now, talk to us about ur losses.
Boomer thinks he’s skilled because he lucked out on free money and the biggest bull run in history 😂😂
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I have similar approach as OP, meaning roughly half etf, and half hand picked, closely followed stocks. My life time average is also similar to OP, beating the market by 2 to 3 percentage. I have been investing 20+ years. People say you can't beat the market, even pros cannot. That is a lie, I can tell you that. I know two money managers, and while they fail to beat the market for their clients, they have almost always beat the market in their own personal accounts. The reason is: there is no management fee, and you do not have to explain your move and justify it every few months. Like currently my account has 20% Amazon, and10% AMD. I held them for over 18 months now, and plan to hold for another 5 years. I am not going to get into argument with anyone whether it is a smart or stupid decision, but I am happy I don't have to explain my decision to anyone. The thing with index etf is, you own a lot of sleepy, do-nothing companies, together with the brilliant ones. Cheers.
I agree, and if you haven’t advisor, their job is to make things look a little bit more sophisticated and do about the same as the market… There is no risk in that for them. Is a different game. They need AUM to collect their 1% for doing almost nothing.
Thanks for sharing ... not here to hate on this fairly sensible strategy. I've essentially been 100% SPY for 25 years, and now that base is big enough that picking stocks and trying to outperform is relatively pointless. Of course I'd love to find the next MU and ride to the moon, but we all know that ain't happening. Buying MSFT or GOOG on a dip is basically just buying the SPY, so unless I start day trading biotech penny stocks I'm SOL
A steppingstone for me that’s a great strategy in itself is to just shift your weight and stick with SPY. When there’s fear buy more and hold a little less cash. When there’s euphoria trim and raise cash. You can shift your weight, but still always be invested and outperform the average with the strategy. You have to have rules though. You’re not right 100% of the time. Not for everyone. And there’s absolutely nothing wrong with 100% SPY 100 percent of the time as long as you have enough cash to never have to sell during bad times.
Btw I had been investing for a little less than 2 years and my return was close to 54% without touching anything or knowing anything, just mostly s&p 500 and mindless stock picking. I then took on more risk and had a big loss (which was a separate decision) - but I guess my point is, don’t convince yourself that the 27% annually recently hasn’t mostly been thanks to the ai stocks outperforming / bull markets.
This is pretty much my strategy at this point too. I've realized that 9/10, the market is right and it's very rare that it's wrong. That said, there's usually 1-2 opportunities every year where the market is down on a certain sector and throws the baby out with the bath water. Those are the opportunities to strike.
It's likely true that there are some secular headwinds and less profitability for a lot of those companies. That said, even if growth/profitability is genuinely lower, the market may oversell so much that now the lower growth rate is either at a favorable valuation or there's a chance for outperformance if the headwinds pass. Those are some of the best moves I've made in my investing "career". To me, investing comes down to:
Understanding the potential for asymmetric bets when you think the market is wrong
Managing risk so that one bad position or a general downturn doesn't wipe you out
In other words, it's calculated risk-taking. I'm of the same mindset as you where I've realized I don't really need moonshots. If I can reliably compound at ~12% over the long run, that's much better than getting lucky with 1 5-bagger and underperforming on all your other positions. At that point, just buy $VOO and be ready to buy more when the market corrects.
Exactly. What are the key criteria for companies you pick? I am typically looking for businesses with recurring revenue, high ROIC, consistent fcf growth, pricing power, a wide moat. Only those make it to my shopping list. Then I study the trading range and wait for dislocation.
AAPL right now!
I have been buying apple on dip since Covid. I sold a third of my position the other day before earnings at $343 when PE was in the low 40s. I will buy it back at something in the 250-280 range if it gets there and if I choose to add more.
I’m curious to know how you manage trimming your positions and the capital gains taxes. Only way I’ve been scraping and not owing the tax man is using loss carryovers from previous years.