Investing in Stocks

We buy individual stocks with a view to holding them for a period of years. We consider ourselves to be value investors, who look for innovative companies selling for a reasonable valuation. In general, we select stocks that meet two criteria prior to purchase. First, we prefer companies whose business is likely to profit from future trends in society in some way. As such, we generally do not invest in “old economy” stocks. Second, the stock price should be temporarily depressed relative to our estimation of the company’s value.  Although past performance is not a guarantee of future success, this investment approach has resulted in an average annual return of 19% over the last 23 years in our private portfolio.

In addition to individual stock investments, at least some long term/retirement investments should go into stock index funds/ETFs. Whether investing in individual stocks or a market index,  the major risk in buying stocks is that a general market downturn depresses the value of most stocks, regardless of the performance of a company’s business.