I've written lots of articles explaining how regular investments into stocks over time can build a portfolio of great value. That's all true, but a chart showing the growth of money over time may seem like just a bunch of math, and it's impersonal, too.
So let's get a little personal. I want to discuss my own actual investing, as I've been at it for almost 25 years now -- ever since I stumbled onto a new financial site called The Motley Fool (in the 1990s!). Here's a look at my three largest stock positions, how I've thought about them over the years, and how they're serving me. I'll also point out some lessons these experiences have offered me -- which might help you do better in your own investing, too.
Image source Getty Images:
1. Apple
The newest of the three holdings is Apple (AAPL 0.52%), which I bought into in 2008. I did so thinking that I was probably late to the party, as the iPhone had been introduced in 2007. The stock had gone from less than $0.50 per share (on a split-adjusted basis) in 2004 to $7 by 2008, as Apple launched the iPod Nano, the iPod Shuffle, the iPod Touch, and then the iPhone. Shares fell sharply in 2008, though, in part because the entire market was in distress, due to the financial crisis of 2007 to 2009. I took advantage of Apple's slump and bought my shares for a little more than $3 apiece (split-adjusted). (Articles by my colleagues Rick Munarriz and Tim Beyers helped convince me.) As I write this, Apple shares are trading for around $122 each, reflecting close to a 40-fold gain for me over 12-plus years, or roughly 35% per year on average.
Sure, many others bought Apple before me and are sitting on much fatter returns, but my gain still takes my breath away. It was a fairly modest stake that I took back in 2008, and I wish I'd bought much more, but I still ended up with a valuable position. Over the years I have shaved off some shares (as few as I could manage) in order to collect a down payment for a home and for a few other needs. My Apple stock has helped me reach financial goals today, and the shares that remain will help support me in my retirement. Thank you, Apple!
Apple lessons:
- Take advantage of market corrections and crashes to buy shares of companies you'd love to own -- when they're on sale.
- Though it can seem like you're too late to buy into a stock that has grown by leaps and bounds, if it's really a long-term winner, there's probably plenty of growth left.
- Big gains can take many years to happen. Really big gains will probably take even longer. You need to be patient and give companies you believe in time to perform.
- Reading a range of opinions on stocks of interest to you can help clarify your thinking and make you more aware of various companies -- and their risks and opportunities. I've gotten lots of great stock ideas from my colleagues' articles.
Image source: Getty Images.
2. Netflix
Netflix (NFLX 1.74%) is another stock I thought I was late buying into. It had debuted via an initial public offering (IPO) in May 2002, and I'd watched it for a long time with much interest. Many of my fellow Fool.com writers were also rhapsodizing about it -- and some of them were buying shares. Netflix had gone public with around 600,000 members, and in 2004, it crossed the 2-million-member mark. It was growing fast, but I wasn't 100% convinced that its future was golden.
I took an even tinier position in Netflix than I later did with Apple. In fact, I invested not much more than $1,000. But back in 2004, I got in at a split-adjusted $2.50 per share. Today, the shares are trading around $535 apiece. That's right -- my gain on Netflix is more than 200-fold -- or about 38% per year on average. That's crazy, right?
I don't have all the shares anymore, as I sold some to raise enough money for a down payment on a home and for other needs -- just as I did with my Apple stock and some of my other holdings. But I've hung on to plenty of shares, and plan to do so for another decade or two. They will likely be providing income to me in my retirement -- and potentially a lot of it.
Netflix lessons:
- Even if you only have a little to invest, it can still grow to a huge sum when invested in the fastest-growing stocks.
- It can be worth putting a little money in seemingly amazing stocks that look overvalued. Then perhaps buy a little more in a few months or a year, if you still like them. You'll be compromising, but will be likely to have fewer regrets.
- If one of your holdings stumbles, think hard about whether you want to sell. Netflix made a big blunder when it planned to split in two, and its shares took a big hit, as lots of investors cashed out. But those who hung on were richly rewarded.
- It may seem like you're investing too late, but the best companies have decades of growth ahead of them.
Image source: Getty Images.
3. Berkshire Hathaway
Now we come to Berkshire Hathaway (BRK.A -0.30%) (BRK.B -0.26%), Warren Buffett's company. I wish that I'd known about Buffett and Berkshire much, much earlier, but at least I did learn about him in time to start snapping up some stock around 1998 and 1999. The Class B shares cost close to $2,000 apiece back then, so I wasn't able to buy a lot at once. (The shares later split, and today they're much more affordably priced, recently at $251. My split-adjusted cost basis is close to $40 per share.)
I love having Berkshire in my portfolio because I can count on it to be a steady grower. Many of my other holdings are smaller, potentially faster-growing stocks, but not all of them work out as hoped. Berkshire encompasses a lot of sturdy insurance and energy businesses, along with other kinds of operations that are likely to keep cranking and growing over time, such as candy, furniture, and even an entire railroad. My Berkshire shares haven't skyrocketed like Apple and Netflix, but over more than 20 years, they've increased more than sixfold, and they now make up a big chunk of my portfolio. They help me sleep at night, too.
Berkshire Hathaway lessons:
- You don't have to buy into a stock all at once. You can buy in gradually, in chunks.
- It's good to balance out a portfolio with some slow-and-steady growers. Your stocks shouldn't all look the same.
- A stock's price alone doesn't mean much. A $2,000 stock can double and triple for you, while a $10 stock can fall. You just need to try to buy when the stock is undervalued, or at least reasonably valued.
Caveats
At this point, in case you're thinking I'm a genius investor, know that I'm not. Over more than 20 years, I've made a lot of classic investor mistakes. I've bought stocks without fully understanding what the company does. I've bought stocks that were way overvalued, only to see them fall. I once even bought the wrong company, because I got the ticker symbol wrong!
But mistakes are inevitable in investing. Even the best investors will make mistakes, and some of the stocks they bought -- with very sound reasoning -- will fail them. You can't always pick the fastest growers. But if you read and learn a lot about companies before buying into them -- and about investing in stocks, in general -- you're likely to do well and to have your winnings far outstrip your losses. That's what has happened to me: All my bone-headed moves have been more than offset by my winners.
Which stocks will fund your future?
Apple, Netflix, and Berkshire Hathaway have served me very well so far, and I expect them to keep doing so. They may serve you well, too, but they may not be able to grow quite as powerfully in the future as they did in the past, since they're now so big. Still, there are other great growth stocks out there that could be terrific for you.
Keep reading, learning, and exploring, and your stock portfolio may be able to help you reach current financial goals -- and fund your retirement, too.
