My Life As A Stock Picker
Updated: Apr 18, 2019
About four years ago I started listening to a podcast on value investing. Up until then, my view of the stock market had been largely shaped by watching my father squander his inheritance - literally millions of dollars - day trading. He died almost penniless and I steered clear of anything close to active investing. I kept my money in mutual funds with the word "stable" in the title. When I got married, I turned my employee retirement funds over to an investment manager at a large bank that my husband had been using. I slept well at night.
I started listening to the podcast, therefore, on a whim. The host walked slowly through investing in the style of Warren Buffett and Charlie Munger and explained how they value companies and decide when to buy. I was fascinated: I had never known that equity investing could be approached rationally. I listened to every single podcast, some multiple times, and I bought the book. I started doing research on individual stocks using this particular pundit's methods. I kept a watchlist of stocks that I would buy, and at what prices.
If you have been paying any attention at all, you know that we are in a historic bull market. Stocks in general are expensive, and it is hard to find a bargain that Warren Buffett might approve of. I did find one company, a medical supply manufacturer which met all my criteria, and I pulled the trigger. I bought 10 shares.
Still there was one part of my podcaster's system that I just couldn't figure out. No matter how many times I listened to him explain it, I couldn't fit his formula for buying and selling into a logical framework. Then I realized: it was a gimmick. Because it is hard to make money (or sell books) touting "buy good companies and hold them forever", he had devised a quasi-mathematical formula for when to sell. Not Buffet-worthy at all.
So I kept reading. I found the Bogleheads and I found physician-specific websites. I read "Heads I Win, Tails I Win" and Berkshire Hathaway stockholder reports. Everyone said the same thing: put your money in index funds. Investing in entire markets and avoiding high fees is eminently logical. Even better, it requires minimal research and effort: more time for my day job.
So when I moved my retirement accounts back to my own control (which is a story for another day), I painstakingly sold every investment I didn't understand and put the money into index funds in my desired asset allocation. (This process took longer than it might have because after every trade I hit the "how did we do? thumbs up" button. I want people to feel good about themselves.) Now my retirement accounts fit my financial plan: simple, understandable and low-maintenance.
I am officially retired from stock picking. I have moved on to other podcasts and other reading. That stock I bought? As of today it's up 66%. If I didn't know better, I would say stock-picking was easy.