Our results thus far -- over an admittedly short period of time -- demonstrate the awesome one-two punch of 1) investing in great companies, combined with 2) regular contributions of new savings. With each new $500, the goal of this portfolio is to purchase just a little bit more of that company of which we'll all one day say, "If only I'd bought $500 of ____." As we've mentioned many times in the past, the Rule Maker Portfolio invests for the looooooong-term. One of the main reasons they hired me for this job is because I'm young enough to stick with this portfolio for the next 50 years (I hope!).
By using the Fool's "How much will my savings be worth?" calculator, I can figure out how much this portfolio might be worth someday. For example, if we get the market's historical 11% annual return, then our account will be worth (on a pre-tax basis) more than $20 million by 2050! That's just one of many calculators that we have in the Fool's new Retirement Area. All of us are investing for a point in time when we'll eventually begin drawing on our savings to live. For me personally, that day is so far off that my "retirement planning" rarely extends beyond the simple combination of saving regularly and investing in great companies.
But luckily, the Fool is blessed with a retirement specialist, David Braze (TMF Pixy), who just started three new retirement portfolios, including a weekly retirement portfolio report. David's portfolios serve as a real-life and real-money example of how to handle such important retirement considerations as asset allocation and annual withdrawals. Even though my retirement is unthinkably far away, I'm finding these new portfolios to be incredibly informative. Get the full story on his three portfolios at this link: Introduction to the Fool's Retiree Portfolios.
For the rest of today's report, I want to turn back to the MakerPort's impending decision for the December $500 investment. Some of you have expressed dismay at what may seem like a haphazard approach to the way we pick each month's investment. On the Rule Maker Strategy board, regular contributor markandsusanv offered some insightful ideas today on how we might go about formalizing this process into a more principled approach. The part of Mark's post which most struck me as a good idea was this paragraph:
"Overall Quality of the company. By this I mean the quality as a rulemaker company using the spreadsheet as a guideline. I don't want to put new money into a company that is increasing debt faster than cash and increasing inventory faster than sales. If a company that I own has fallen from the top two tiers of Rulemakerdom I'm going to watch to see if it recovers before giving up and selling but I'm reluctant to add to the position unless the company improves. I therefore require the company to be a tier one or two company to invest more."
(The entire post is available at this link: Adding to an Existing Position.)
Thoughts such as Mark's are always welcome in the Rule Maker forum. This has always been a portfolio that has evolved and improved because of feedback from you, our community.
Essentially, our number one goal in adding money to existing positions is to put money into the best companies, the ones that are most fully exemplifying the attributes of a Rule Maker. For that reason, it makes perfect sense to only consider the companies that qualify as either a Tier 1 or 2 on our Rule Maker company scoring. Right now, the qualifying companies include Cisco, Microsoft, Intel, Yahoo!, and Coca-Cola. (Unfortunately, it's quite difficult to conduct the Rule Maker analysis on financial companies such as American Express and T. Rowe Price, so we may have to make exceptions for these companies.)
I encourage you to read Mark's full post, and let us know what you think on the Rule Maker Strategy board. Tomorrow, I'll be back to fill you in on my opinion of where our next $500 should go.
One last thing tonight, our Motley Fool Radio Show producer Mac Greer is looking for some guests for this week's show. He needs some folks who wouldn't be too shy to answer the question, "What was your dumbest/smartest investment
this century?" If you're interested in participating, e-mail Mac at firstname.lastname@example.org
with your thoughts and a daytime phone number. If we take your call on-air, we'll send you a free copy of our newest product, Industry Focus 2000, which highlights some exciting investment prospects for the year ahead.
- Matt Richey