This is day two of celebrating over 1 million weekly readers with an “Ask Me Anything” episode based on reader questions I solicited last week. Here’s the second set of answers! Today’s theme is my investing history and some questions about my investing approach. Congrats to all the winners.
- sylvyse: How long do you hold a stock in your portfolio?
- MB: The shortest I might hold for 2-3 months, the longest are all 5+ years. It’s quite rare for me to enter a new stock or sell a stock completely; most of my activity is selling a portion of one holding to “double-down” into another, or using dividend income to buy more of a stock I already own.
- Kobe24PaulGeorge: What is your educational background, and how did you build your background in investing / financial literacy / trading?
- MB: I have a Bachelor of Arts in Political Science and a law degree, plus I passed a basic securities course when I became a corporate lawyer. But I don’t have any formal training in investing or finance. All of what I know comes from putting my own money at risk, and trying to learn as much as I can about the things that impact my investments. I try to really learn the painful/expensive lessons that the market teaches. I try to transform those lessons into procedures or principles that I use to guide future decisions.
- Brent: How do you manage to go through all the disclosures that come out daily and pick what to include in the daily newsletter?
- MB: I did a deep dive into how MB is made, you can check that out here. When it’s not earnings season, there are usually around 20-30 disclosures per day that could contain something interesting in them, but after having done this for so long, I very quickly weed out all the low-value stuff (buy-back transactions, briefing notices, change in shareholdings notices, etc) and focus in on the types of disclosures that are most likely to contain red meat (material information notices, press releases, clarifications, acquisition or disposition of shares, etc). There are usually only 5-8 of these types of disclos on any given day. I do a quick read of each to see what most interests me, and then I start my deeper reading and writing process on maybe 3-4 of those storylines. I usually pick things to write about that check multiple boxes on the “potentially interesting” checklist: big news, big names, interesting transactions, opportunities to learn something new.
- Jeys: Do you have an unpopular opinion with regards to holding long-term?
- MB: Not so much an unpopular opinion as what I think of as an inconvenient truth: my investments are better off without me. The more involved I get, the worse my investments tend to perform over time. I buy and hold for the long term (my goal is usually to hold for 1-5 years), and I’ve almost always hurt my potential returns when I try to get cute and pick intermediate tops and bottoms. I’m almost always better off just letting my picks sit. When I was younger I’d trade just for the sake of making a trade, to feel cool hitting the buy or sell button like I’m some kind of big shot. All I really ended up doing was hurting my returns and giving some commissions to my broker.
- Edric: What do you do with stocks that have reached your target price?
- MB: In my version of investing, I try to imagine the ways that the country will change over time, and I try to pick the companies that are best positioned to monetize that change. When I do this, I don’t really have a target price in mind, so much as I have a “target circumstance”. Let’s say that my thesis was that nuclear power would be the primary source of electricity in 10 years (it’s not, just picking something for sake of example). Once I do all the research to pick my companies and my entry points, I’m going to wait until parts of that thesis have come true, like nuclear power being a primary power source, before I'm going to look to sell. That's a huge over-simplification, as it ignores all of the re-evaluations that I do along the way to confirm that my thesis is still accurate, but it's at least the start of an explanation as to why I don't really enter into a trade with a specific target price in mind.
- @_JAOBAN: If you could tell any financial advice to your 20-year-old self, what would it be?
- MB: I’d tell myself to spend more time trying to figure out my investing niche. In my early trading days I spent waaaay too much time trying to be a bigshot portsnap trader, and that caused me to make bets that I didn’t really understand, carrying levels of risk that I didn’t really appreciate. I nuked my account several times in my 20s doing this. It took so long for me to accept the reality that what I was good at was picking long-term winners and tending a small garden of picks over years. Once I accepted my strategy and then focused on improving it, I stopped sabotaging my performance with random/uncontrolled losses and actually started to build a portfolio that would grow every year. To be clear, long-term investing is what works for me. If your “edge” is in technical analysis or with some other signal set or timeframe, then my approach isn’t likely to help you. But the advice to myself--to focus on what works for me and forget the rest--would apply to anyone.
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