Happy New Year everybody!
First of all, many thanks to all. The BMW method has influenced every investment purchase I make, whether or not I strictly adhere to the basic principles. If nothing else, it keeps me from buying an equity above an estimate of fair value (average CAGR). I've enjoyed the civil, if not spirited, discussions. Thanks for being patient with beginners like me. I have to give special spreadsheet props to Divebomber, whos spreadsheet I use the most. Not to discount the work of others, but I just haven't used them since I found a tool I really like and am comfortable with, there's only so much time in a day. And of course, thanks to BMW himself for generously sharing his knowledge.
For the New Year I will strive to:
1) Be patient with stock purchases. I do NOT have to buy within a couple days of my initial look at a stock. More often than not, the price will drop further or hover for a couple weeks, giving me time to research properly. There will always be opportunities, so it's ok to miss one for lack of research. Be disciplined.
2) Look before I leap. Too often this past year, I've made purchases without truly understanding the company. Complete the big picture evaluation at the very least to identify areas for further investigation. Become comfortable with the decision to buy. Rely on more than just a gut feeling, which after this holiday season is a bit bigger. Must be able to concretely justify the reasons for the investment. Especially helpful when I tell the little woman we own XYZ and she asks, "why?"
3) Rely on more than the opinions of others; do my own due diligence. With investing, it's been too easy to read what everyone else is doing and saying, and then basing decisions on what I've read.
4) Ask more questions. How else am I going to expand my knowledge set to be able to make sound decisions?
5) Contribute more company analysis and seek critiques. The beginnings of this are seen with SYY and CAG, posted last month. This will enable others to find holes in the analysis and also hopefully give investing ideas to the MF community.
6) Develop an investing handbook. Reading is all fine and good if it sticks in my brain. But sometimes there's so much out there, it's hard to keep it all straight. One can find a good example in one source and a good explanation in another source, but rarely does one source have it all. The handbook will consist of definitions with concrete examples and caveats (ROA, EPS, etc.), valuation techniques, basic investing philosophy and strategy, etc. Three primary goals are to create a resource I can rely on if places like the Motley Fool ever go away, pass the limited knowledge down to my daughter in a hopefully concise way, and self-education. Also, when this is finished, it will leave me with more time to actually apply the knowledge learned.
7) Stick to my guns. In other words, write down the rules and follow them. Only buy when x, y and z conditions are met. Develop more faith in the analysis and methods to be confidently disciplined.
8) Develop a short-term strategy. Short-term defined as weeks to a few months. Allocate a very small amount of money towards this activity (less than .5%). We'll call this fun money. See how much I can get this to grow and compound. The goal is to double the initial investment in one year, taking into account taxes and transaction fees. This one is low priority, let's make sure understanding company fundamentals comes first.
So far my BMW Method-influenced purchases over the past 6 months, since being introduced to the BMW Method, have returned 4.8%. By comparison, the Vanguard S&P Index fund gained 1.8% since the beginning of June. Not too bad (read lucky) for six months. The goal in the coming year is continue to make more knowledgeable decisions and soundly beat the S&P by a larger margin.
So there you go. Let's see how well it goes.
I hope this coming year is good to every one of you and your loved ones.
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Happy New Year everybody!