Wait. Hold on a second.
Did he just say he’s never going to sell another stock again?
Yes. That title is correct.
I plan to never sell another stock again.
And I’ll tell you why.
This might be one of the most important articles I’ve ever written as it relates to my growth and evolution as an investor.
However, I’d actually say the impetus for this article relates more to the growth and evolution of my mindset as a person. It’s about what kind of lifestyle I want to live.
Nonetheless, I’ll do my best to keep this article short (although there’s a lot of ground to cover).
That’s because I don’t want it to come across as sanctimonious. I also don’t want anyone to take any of this as a recommendation. Being as open as I have with my finances over the years has sometimes confused people into thinking that my writing should be construed as financial advice. That’s just not the case. So please don’t read this and think that I’m telling you to never sell any of your stocks. You should manage your finances and portfolio in a way that you think is best.
I’ve only ever aimed to show my personal journey to FIRE, as well as my post-FIRE lifestyle, in real-time.
That’s because I hope it provides insight into a unique take on things – there are few people in their 30s, FIRE, living abroad in Thailand full time. I’d know because I haven’t run into any – and I’ve been looking.
I also aim to inspire others by showing them what’s possible.
Well, a major function of showing possibilities, obviously, is the finances.
And so along with the journey toward a better, happier, smarter, and freer person comes the journey toward a better, happier, smarter and freer investor. The latter is a big part of the former, especially when finances are so intertwined with the FIRE lifestyle and our ability to be free to improve ourselves and the world around us.
My experience with money management, wealth building, and investing over almost nine years now has taught me a lot about what kind of investor I want to be. Indeed, what kind of person I want to be.
And the investor I want to be is, one who never sells stocks.
Why?
I’m going to break that down.
It’s important to recognize, before I begin, that the rationale here is largely driven by a thoughtfulness regarding what kind of life I want to live. This article is written mostly from a lifestyle standpoint, rather than solely an investment performance standpoint. For me, “performance” is more about my life and happiness than my money.
This post will be great to refer back on if readers ask about the complete lack of stock sales in any future FIRE Fund updates. Any questions about my interest in selling stock X or Y can now be easily answered by referencing this post.
Keep in mind, this article is basically the “capstone” in a long-tail evolution that’s been playing out for years. It’s not a sudden 180-degree turn. I’ve been a long-term, buy-and-hold investor since Day 1. It’s not like I’ve ever attempted to time the market or trade stocks.
For reference, my portfolio turnover has been steadily dropping as the portfolio has grown while I’ve simultaneously sold less and less stocks. Turnover for 2018 is something around 2%. So to go from 2% to 0% isn’t really much of a stretch for me.
This decision’s rationale will be broken down into seven separate but complementary and holistic concepts that I’ve been building on over the years, which have all now combined to culminate into this conclusion.
FIRE Lifestyle
Not worrying about selling gets me closer to the wonderful lifestyle I set out to create.
The main point of being FIRE in the first place is to be free.
FIRE, to me, is all about enjoying a carefree, easy, happy lifestyle. So to constantly be thinking/worrying about money, and sitting there and managing your finances all the time, is basically antithetical to that.
You’re chained to money in that scenario. Maybe you’re free of a job, but to be not free of money itself is almost as bad. Trading one master for another doesn’t strike me as an improvement.
I rarely think about money or stocks, honestly. But a disproportionate percentage of the thoughts that have occurred over the years have no doubt been allocated to the hemming and hawing that’s involved when debating a stock sale. Getting rid of that is addition by way of subtraction, making my life better by getting rid of one more thing I don’t need.
One thing I love about being a dividend growth investor is how easy and automated it really is. This is especially true once you’re ready to live off of your dividends.
I’m paid just to exist. When I wake up, fresh dividends are in my account. The (growing) dividends roll in without any input on my part.
It’s a dividend compounding machine that requires no further action on my part.
And so it’s unnecessary and potentially harmful for me to artificially and forcefully add input into this equation by tinkering with a finely-tuned machine that works all by itself. I’m creating “busy work” in this scenario.
If my stocks could talk, they’d tell me: “Look, Jason. Appreciate everything you’ve done. But we’ve got it from here. Now go and enjoy your life.”
Understood.
Thinking Like An Owner, Not A Trader
Moreover, I’ve long thought as an owner, not a trader. Not selling at all moves me even closer to being an owner.
I mean, if I were to buy a business outright, I wouldn’t then be thinking about selling it. I’d be buying it to keep it forever.
And if I owned a collection of businesses outright, I’d be more than happy to let those businesses go to bat for me, make me money, and send me my share of profit (which is what my growing dividend payments essentially are). There would be no point to thinking about complicating that.
My portfolio is nothing more than a scaled-down version of all of this. Stocks aren’t just pieces of paper. They’re slivers of real businesses.
Likewise, if someone were to sell me a stake in a private business out there somewhere, I’d be buying that stake with the intention of basically keeping it forever.
And that would be made easier when you don’t have stock prices flashing at you every day. No “crazy neighbor”, as Benjamin Graham would call Mr. Market, knocking on your door every day to offer you money for your stake.
That intention to hold forever shouldn’t be different because a neighbor incessantly bangs on your door. Just because there’s knocking, it doesn’t mean you have to answer. You can simply ignore the knocking.
Well, it would never be easier to ignore that knocking than when the thought of selling never enters your mind because you’ve “shut the door” on that option. Bye, neighbor!
There are a few high-quality dividend growth stocks I’ve sold over the years, often due to valuation concerns. But these were really great businesses that I should have been happy to sit on my hands with and remain a partial long-term owner.
Tiffany & Co. (TIF) is a great example of that.
That’s the kind of business you buy cheap and keep. It’s dumb to do anything else. But being dumb has made me smarter, which is great.
I would love, going forward, to fix those mistakes of commission by once more (when the opportunities present themselves) accumulating stock in those great businesses I once owned a slice of. Next time around, though, I won’t let them go.
A Portfolio Is Like A Bar Of Soap
There’s an old saying that has never meant more to me than it does today:
“A portfolio is like a bar of soap. The more you handle it, the less of it you have in the end.”
Well, I think it’s time to take that idea to the extreme end of the scale.
Why not have all of the soap? Why not just avoid handling the portfolio at all?
If my portfolio really is like a bar of soap, I’d rather just keep that thing as intact and as fresh as possible.
The more my human nature enters the picture, the greater the odds are of a contamination of my germs and biases.
Great businesses should, and very likely will, go on to continue being great. I don’t need to handle that.
In addition, the handling of that bar of soap requires time, energy, and focus. All are in short supply. And there’s an always an opportunity cost to consider. Said another way, I’d just rather allocate all of that toward more meaningful pursuits than thinking about whether or not to sell Stock X.
No “Get Out Of Jail Free Card”
If I’m being honest about things, buying stocks has always come with the thought in the back of my mind that I can sell if things go awry. There’s a “get out of jail free card” that I can play at any time.
And I’m not sure that doesn’t partially corrupt the buying process.
Knowing that I’m “burning the ships and storming the islands” without that “get out of jail free card” means I have to be far more thoughtful and careful on the buying side.
If I’m planning on truly holding a stock forever, then I should be pretty well sure about its prospects for as far as the eye can see.
While I’ve rarely sold stocks very often, and while many of the few sales I’ve committed (General Electric Company (GE) comes to mind as a recent example) have gone on to perform relatively poorly, and while I always stayed in the market (quickly reinvesting any capital from a sale), the real issue is that a large number of my sales should have never occurred in the first place. That’s because the buy should have never occurred in the first place.
Eliminating the possibility of sales means I have to be that much more stringent when I’m buying.
Reducing Friction
Committing to never selling reduces friction.
No additional potential taxes to worry about. And although I’m not paying commission fees right now, there’s always a chance that could change way down the road. Less paperwork, less transactions, less headaches.
Less friction means more smooth sailing – across the portfolio and my life as a whole.
It’s also not lost on me that all of these companies are often doing buying and selling, too. They’re frequently reshuffling their product/service portfolios, including M&A.
So there’s already a lot of friction by the very nature of companies being companies.
I don’t need to add to the chaos.
Getting The Best Out Of Index Investing
Some people might think I’m not a fan of index investing.
That’s actually not the case at all.
I see three basic but fantastic benefits to it: low costs, broad diversification, and limited turnover.
It’s that first point in particular that often gets actively-managed funds in trouble. They might have very good performance, but the fees (which work against the compounding) add up and mitigate the performance at the individual investor’s level.
As such, most people are better off just buying a broad-based index fund and going about their life. Indeed, “going about my life” is pretty much what this article is mostly about.
However, one has to keep in mind that an index fund is just a collection of stocks. It’s not magic. Buying the S&P 500 is pretty much the same thing as someone else buying all ~500 stocks simultaneously, in the same exact weighting. Furthermore, these ~500 stocks, along with the weighting, are selected by a committee of people. It’s not as “passive” as some would like to think.
All that said, I think index investing is great. It’s not perfect. But it’s great. It’s just that I know I can accomplish all three aforementioned benefits, without the associated drawbacks (lower yield, exposure to lower-quality companies, etc.).
So what I do is take advantage of those benefits.
My portfolio is very diversified. I pay no commission fees. And there’s extremely limited turnover.
But I avoid the drawbacks.
This decision to avoid all selling in the future takes this concept and supercharges it. Limited turnover now goes to no turnover. I’m still paying no fees (which beats the vast majority of funds). And I’m pretty close to being as broadly diversified as most of the major index funds (keeping in mind that the top ~120 stocks – approximately the size of my portfolio – account for 70% of the S&P 500’s capitalization).
But my portfolio doesn’t feature relatively low-quality companies. And the yield is about twice what the S&P 500 offers right now. That means I can live off of the income component only without selling equity (which is what I’m talking about here).
The ironic thing is, it’s precisely because I’m not buying an index fund that I can actually follow a “never sell” rule. The S&P 500, which is the most followed index out there, intermittently sells positions and replaces itself. And investors in it often have to sell off equity (albeit indiscriminately) in order to fund some of their expenses in retirement (due to the low yield). That’s before factoring in the investors out there who still time the market with their funds, buying high and selling low (which we’ll talk about in the next point). Funds are not immune to human psychology.
I’m taking the idea of buying and holding an index fund to the next level. This is actually following through with “buy and hold”. It takes advantage of index investing’s biggest benefits and avoids its biggest drawbacks.
Greater Performance
I’d usually say something like “last but not least…” here.
Except that’s not the case.
I’m purposely bringing up performance last because that’s where it’s at in terms of priority for me. As noted earlier, I’m more concerned with “life performance” than “investment performance”. I value time much more than money, which runs counter to where almost everyone I’ve ever met and talked to are at. Money isn’t my master. As such, I’m a very happy person. Most other people are not.
Nonetheless, it strikes me as highly likely that the portfolio will perform better with this approach, which is icing on the cake.
There have been multiple research reports that have come out proving that the S&P 500 itself would have performed better if it hadn’t changed its rules, sold stocks, etc. Since the S&P 500’s founding in 1957, almost 1,000 companies have been removed from the S&P 500. According to Jeremy Siegel:
Those who bought the original 500 firms and never sold any of them outperformed not only the world’s most famous benchmark stock index but also the performance of most money managers and actively managed equity funds.
The difference in performance between keeping the original 500 firms and the current S&P 500, from the index’s founding in 1957 through December 2003, was 100 basis points per year (11.3% per year versus 10.3% per year). It’s significant.
Index investing is still, almost always, a great way to go about investing. It’s just that (as I mentioned earlier) it’s not as “passive” as one might be led to believe, and the S&P 500 would be better off if it, too, had been more passive over the years.
A great example of truly sitting on one’s hands is Voya Corporate Leaders Trust (LEXCX), which is a trust that truly never sells stocks. It can trace its roots back to the 1930s. Its current holdings are all direct descendants of the holdings it originally chose when the trust was established all the way back in 1935.
Perhaps not surprisingly, it’s performed quite well over the last 80 or so years, handily beating the broader market.
Lastly, just to show how disastrous needlessly handling a bar of soap can be – even, or especially, a particularly amazing bar of soap – let’s talk about the Fidelity Magellan Fund (FMAGX).
Peter Lynch famously ran the Fund from 1977-1990, delivering an astounding 29% average annual return during that time.
However, Fidelity found, through its own research, the average investor in the Magellan Fund actually lost money during Lynch’s 13-year tenure.
That. Is. Insane.
This happened because they were selling during times of poor performance, and then they were coming back in after it had performed well.
Said another way, they were abundantly handling a bar of soap that just didn’t need to be handled. Again, a fund isn’t immune to poor human behavior. “Just buy the S&P 500 and hold it.” Sure, and “don’t eat that slice of cake.” Things are easier said than done.
An intelligent investor is an unemotional investor. I can’t think of a better way to limit the potential for excess emotions than to eliminate the emotions that are involved in the yes/no dynamic that occurs when contemplating a sale.
Conclusion
I’m actually relieved to write this article. It’s a weight off of my shoulders to not have to worry about managing the portfolio on the sell side. No more “breaking the piggy bank”.
This gets me closer to the lifestyle I set out to create years ago when I first imagined what FIRE would be all about.
Of course, I do still intermittently buy stocks.
Since I’m already FIRE, however, I’m no longer aggressively buying stocks (i.e., investing thousands of dollars per month).
But the additional flexibility and freedom that this added passive dividend income (via high-quality dividend growth stock purchases) brings to my life is much appreciated. The organic dividend growth (via the dividend increases the companies I’m invested in are regularly announcing) are doing most of the heavy lifting these days, though. And that’s a wonderful position be in.
Furthermore, I do still enjoy being an investor in terms of seeing what my businesses are up to (reading news, browsing annual reports, etc.), as well as finding great businesses that I don’t yet own. Even though I’m invested in over 100 companies, I acknowledge there are many, many, many truly wonderful businesses that I don’t yet own a slice of. And I certainly find it interesting and worthwhile to change that, slowly, over time.
There is a caveat to all of this, however.
I do reserve the right to sell any stock at any time, regardless of any designs I currently have. I’m not held to a contract or anything here. Nobody made me write this article. I’m not managing anyone’s money but my own.
But the only reason I could imagine citing for such an action would be a need to suddenly raise a large amount of capital (for an emergency, illness, etc.). Otherwise, I won’t be selling stocks moving forward.
Finally, M&A action (such as partial or entire buyouts) will surely continue to occur without my input, but I won’t act on any of that outside of investing any capital remaining from forced sales.
I’ll quickly conclude by once more noting that this is not investment advice. I’m not recommending anyone else do as I do, nor have I ever recommended anyone to do as I’ve done.
All I’ve ever wanted to do with my content and message is share, help, inspire, create, transparently keep myself accountable, and maybe make the world a slightly better place.
Full disclosure: I have no positions in any of the aforementioned stocks or funds.
Did you enjoy the article? What are your thoughts?
Thanks for reading.
Image courtesy of: Sira Anamwong at FreeDigitalPhotos.net.
P.S. If you’d like to achieve FIRE, regardless of how often you plan to sell your stocks, check out some fantastic tools and services that I personally used on my way to becoming financially free at just 33!
A bold move sir!
FV,
I suppose. But I’m going from low-single-digit turnover to zero. It’s not that big of a move, relatively speaking. I’m relieved. 🙂
Cheers.
Jason,
This is a very interesting and compelling article. I know you have thought it through and will defend your position.
My question is what if the original thesis for buying the investment changes? Or if there is a case of major fraud taking place in the company. Is it a matter of letting it ride and letting diversification carry the day?
Will you still continue reading company news and reports in real time or will this be dialed down as well?
Best wishes in comfortable Northern Thailand.
Mike
Mike,
Thanks!
It’s been a slow-moving process that’s just evolved naturally. When I think about the lifestyle I’d like to live (which I’m living now), it doesn’t include hemming and hawing over stock sales. I’ve noticed the buy decisions are always pretty quick. Selling is way more time consuming. It’s a “life performance” call. The fact that this will probably be better for financial performance is icing on the cake.
As for reading company news, that’ll continue. It’s noted in the article. I enjoy being an investor. I look forward to reading through the press releases (a number of earnings reports came in today, for example). A few bad reports will undoubtedly roll through here and there. That’s just part of the process.
Hope all is well in your neck of the woods!
Best wishes.
Hi Jason,
I’m a buy and hold investor, I’ve sold very few stocks over the years. Sure enough, one of those sells was a longer term mistake. I understand your epiphany about limiting your management time on the sell side.
You recently sold your stock in Papa Johns. If you had made the “no sell” decision a few months ago, would you have hung on to that stock? In general I’m in favor of holding, but sometimes a once promising investment needs to be pruned.
Freddy,
Right. It’s all about time management and lifestyle preference. I’ve noticed that the sale process involves way more consternation. Just not for me.
As for the PZZA sale, it was the “straw that broke the camel’s back”, if you will. I’ve been thinking about this for some time now. It’s been an evolving thought process. After reading through some of the drama at the company and trying to figure out how that relates to their sales struggles, it occurred to me that I’d rather just go on about my life. Could have kept it. Maybe should have. It was a small position that wouldn’t have made much difference. Regardless, it won’t ever happen again. And that’s a relief. 🙂
Best regards.
I love it! We’ll see how it turns out in a few years. I’m pretty sure you’ll do just fine. Your position is not too concentrated so even if one company fails, it won’t impact your portfolio too much. Life will be even more simplified, that’s my goal too.
I met up with a friend yesterday and she was agonizing about her stock. Her portfolio dropped $40k and she hated it. She was saying she should have sold, etc… I tried to convince her to just hold on and relax. I doubt she listened to me, though. Oh well, I tried.
Alas, I’m not quite ready to stop selling completely. Late last year, I sold GE and I’m very glad I did. Sometimes, you just gotta get out. 🙂
Thanks!
Joe,
Thanks, man. Glad you love it! 🙂
Indeed, the portfolio is so diversified these days that even if, say, Pepsi disappeared off the face of the planet, my lifestyle wouldn’t even be impacted. The other dividend raises would soon make up for the lost income and I’d be right as rain.
I think my portfolio lost $10k or something in one day last month. I honestly didn’t even flinch. It doesn’t bother me. I don’t know if I’m weird. Maybe I am. My life path thus far has certainly been anything but ordinary. I enjoy being different. Ha!
Thanks for dropping by.
Best wishes.
Nice article Jason. It makes me reflect on my portfolio, unfortunately I can’t say they’re all strong “keepers” but you live and learn. I’d like to think that from here on, I’d be a bit more selective in my purchases. What companies would I really like to buy and OWN forever? I too, had that mentality of “I can always just sell it”.
In regards to any failure of increasing a dividend, cutting a dividend or eliminating the dividend… is that a straight red card / sell?
Gerard,
It’s up to you if that’s a straight sell. I made my thoughts clear in this piece. It was 3,000+ words. If that doesn’t set the record straight, I’m not sure what will. 🙂
Cheers!
I understand. I just know from your history that you didn’t take any prisoners when it came to failure to raise a dividend or cuts or eliminations. With no specific mention to these “crimes” I had to ask 🙂
Thanks
Absolutely fabulous post! One of my favorites! Everything you share makes complete sense to me. Especially agree with the bar of soap analogy. I’ve always found that handling the soap diminishes returns in my personal experience. Wishing you all the greatest, my friend!
Ian,
Thanks so much. I’m really glad it’s one of your favorites. I’ve written so much over the years, so that says a lot. 🙂
Yeah, the bar of soap analogy is great. I’ve come around to realizing it’s better to avoid handling it all. Better to have a full bar of soap without my contamination.
Wishing you and your family the best, too. Hope all is well.
Best regards!
PPC Ian,
Does this mean your next video will be from the shower? Or you will place the soap beside the Huggie’s on the shelf above you?
🙂
I have the same policy, but it is entirely from laziness. I don’t want to think about selling. I just have to decide what to buy. And I’ll be buying for decades.
Makes for a much simpler life 🙂
Ben,
I love it. I guess I’m a little bit lazy at heart too! 🙂
Cheers.
Good article. I would imagine while there will be a few stocks in the future that will be real dogs, this will be balanced out by not selling others that go on to outsize gains. I think by far the greatest benefit of this “never sell” mindset, is just overall peace of mind. I enjoy reading about and researching stocks, but I grow weary of always wondering if I should sell this stock or that stock. It can take over too much of your life if you aren’t careful. I think the peace of mind of just letting it be, is priceless.
Tim,
Exactly. It’s peace of mind. I didn’t do all of this just so that money, stocks, or a portfolio could be my new master. I go about my life and really enjoy it. This was a big relief. I feel much better moving forward, not that I ever sold much anyway.
Best regards!
Good Article. I regret having sold most of the stocks I have ever sold. Lesson learned.
You had mentioned in an article a long time ago that you would only sell a stock for two reasons:
1. If the company did not give an annual dividend increase, because therefore it is no longer a dividend growth stock and no longer meets your criteria for a dividend growth portfolio. I think that’s why you sold DE.
2. If a stock cuts it’s dividend although you did say you would have to look at why it cut it’s dividend before making that decision.
Do thise still hold true or is that still on a case by case basis?
And ya, while I have never ownded TIF, I have sometimes wondered if you were ever thinking, man I should have kept TIF. But then on the other hand, you seem pretty content with your decisions and don’t look back in the rearview mirror.
Which ever way you slice it, you are doing better than 99% of millenials I know.
Steven,
I won’t sell stocks anymore. I tried to be as clear as I could with that here.
As for TIF, I don’t “regret” it. Being dumb has made me smarter, which is great. Making mistakes of commission help me improve. It all led to this point. And I’m quite happy about that. 🙂
Cheers.
Hi Jason,
I understand why you will never sell again a stock. For instance ABInbev did recently cut their dividend and a lot of dividend investors would sell their shares, I did take advantage of the opportunity to scoop up some more shares at bargain prices. The cut wasn’t because of the performance but to lower their debt pile at a higher rate, which is a good thing and will allow dividends in the future. My aim is also to never sell, but if they come out with fraud or any other of those things it will be a sell. I can accept a lower business performance for a time( al companies go trough a rough time from time to time), but being fraud is where I draw the line.
Thanks for the good read!
LTI,
No problem. Hope you enjoyed the piece!
Best wishes.
Hi Jason,
as you are a dividend investor, what about when a company cut or eleminate the dividend? Will you stick on your no sell rule?
Thank you for the article, I will try to sell less 🙂
Andy
Andy,
I laid out my case in the article.
Cheers!
Very interesting article.
Can I be your proxy sit-in for annual shareholders meeting at Berkshire Hathaway(BRK.B)? I believe you still own one share, but hard to go to the fun shareholder meetings in person when outside of the USA. Will you miss going?
FYC,
No. I don’t miss going. It’s actually great now because you can watch the live telecast. It might be a little bit better to go in person, but I didn’t find that added value worth the added cost (flights, hotel, etc.). It was awesome to go to the 50th, see Buffett and Munger in person, and meet a few people. But I’m able to meet neat people from all over the world living here in Chiang Mai, which is much better than it ever was in the US. I think I met, maybe, five like-minded people/readers in Sarasota in all the years I lived there. I’ve met closer to 20 readers since I moved here. I actually just got an email from a German reader yesterday who wants to meet up soon. And then there are the hundreds (or thousands) of non-readers I’ve met at various functions over here. How ironic and funny it is that I meet more people now that I live halfway around the world. 🙂
ETA: I just saw the part of your comment about the share. I don’t, and never did, own any Berkshire. Also, I want to note that I enjoyed going for the 50th. I’m super glad I went and experienced that. But it’s not something I’d want to do every year, especially now that I can watch online.
Best regards!
Firstly, great article and I’m in full agreement with your “life performance” piece of mind prioritization. The handling the bar of soap and trading one master for another analogies were spot on. When I get to the level of being able to live of my dividends, I’ll gladly stop worrying about selling myself, but mostly look forward to not having to pay attention to stuff.
The comment about the BRK annual meeting got me to respond as I was at that 50th and was able to meet you and a few other readers, which was great. It was also great to see two of the greatest investors of all time in person, and the whole shareholder meeting deal at least once. I’ve contemplated going again, but since I’ve already gone and now they’re doing the live telecast, it’s probably not worth the effort and crowds, but I would recommend folks go at least once, I think it was worth it.
Love hearing about your FIRE life out there and look forward to getting there myself one day soon and hopefully grabbing a drink out in Thailand one day.
Cheers!
Sundeep
Sundeep,
Yeah, it was great to meet so many people at the Berkshire meeting. That was an amazing and unique experience. Would definitely recommend people check it out at least once. We’re in agreement, though, regarding the added costs not necessarily being worth the added value in terms of going again. I can wake up mid-morning and watch online in my pajamas. I like that. 🙂
Best regards!
Jason
I am a buy and hold DGI so I get it regarding not trying to sell or trim stocks that you think may be overvalued. And I also get how having the no sell rule make one more thoughtful about the original purchase. But what about taking a tax loss on a stock where the bottom falls out-divy cut, etc. you can even buy the stock back in 30 days if you still believe in it.
Scott,
I won’t be selling stocks anymore. It’s laid out above. 🙂
Cheers!
Never say never and never say always. Something like that.
When I first started reading I thought “He is going to switch to a Total Market index approach”. 🙂
If a company reduces their dividend to 0%, would that trigger a sell?
If a company stalls out and falls to a penny stock, would that trigger a sell?
In a sense, you’ve created your own index fund. Enough stocks to avoid much of the individual stock risk.
I do worry that your dividend return will stay ok but your “Total Return” will lag. It could lag badly. But, you are FIRE and it really doesn’t matter.
Thanks for the update and keep on trucking!
Wade,
Hmm. We’ll see. The data actually indicates the opposite of what you’re talking about here, but the added financial performance would be icing on the cake. I’m more worried about life performance. If you told me I could crank out an extra 0.25% of total return per year (which would matter zero to me since I don’t live off of principle) by spending a bunch of time managing the portfolio, I’d say no. Fortunately, the data strongly indicates I’ll better off sitting on my hands. That’s a win-win. 🙂
People overestimate how smart they are. I’m willing to be dumb and lazy.
Best wishes.
I myself have unwittingly moved into the same non action. There is a commenter on Seeking Alpha by the name of buyandhold2012 (I believe) and his mantra is to never sell.
I have read where even if Kodak was in your portfolio and you held it to bankruptcy, you’d still be better off than other, similar, stocks with the spinoffs and mergers of said companies- Eastman Chemicals, etc. So you wouldn’t have lost your total investment.
While I have read that 25-30 stocks among the 8 or 9 sectors of the stock market is good enough for diversification, I tend to buy companies that I like. I imagine I will have about 2% or less in each company that I like and if one went to $0, I would still be ok as the others will make up for the loss.
Ed69,
Right. You have to be fairly diversified if you’re going to do something like this. If, say, Apple suddenly went to zero tomorrow, I’d be just fine. It wouldn’t even be a blip on my radar. But if that were 10% or something of my portfolio, that’d be a different conversation. I see index investing’s strengths (discussed above) as something to emulate, but they can be improved (which is what I’m doing here). Converting minimal fees into no fees, limited turnover to no turnover, etc.
Best regards.
Now what about if a dividend is eliminated from the company would you still hold on to the company or just continue to hold and let it work itself out ?
Alex,
I laid that out in the article with 3,000+ words. Can’t explain it any better.
Cheers!
I’m generally a buy and holder but that doesn’t mean I won’t sell. Eventually I would like to get out of Goog I know for some that is sacrilegious but I’d rather have the money in dividend stocks. Don’t know when I’ll sell it but someday will. But till then I hope it skyrockets way up lol.
hobbies,
I’ve always been a pretty stodgy buy-and-hold guy, but it’s just kind of naturally evolved to this end point. I’m relieved! 🙂
Best regards.
Hi Jason,
after your article I checked my Excel list what I sold the last four years. I always mark the line in blue. There are not many positions and all except of one in 2015 were takeovers, one law change in Russia or mergers (Dr Pepper Snaples to Keurig). What I can see is, that these passive sellouts were mostly positive for my portfolio.
So my last active sell was Kinder Morgan in 2015 and it was a bad idea, even if I didn´t hit the lowest price. I definitly lost money with that. OK, the price for Kinder Morgan is still low, but in 2016 I bought a position back and when I look for the dividends I think the development is quite OK. On the other side I own some GE, which are really cruel. Nearly no dividend, the price of the share is low and it will take its time, if they succeed to come back to the old worth. Nothing to be optimistic with that company. On the other side: I own 85 Shares of GE, they are worth 800 $ and what will I gain with that when I sell? So I hold on and I don´t think much on it. When I look at my overall worth of my portfolio, I´m around 5.000 EURO below my highest point. Nothing to complain. There were some really nice dividen increases with VFC, SBUX and ABBV the last time and when I look at my overall dididend income, it is always increasing, even if I have a dividend cut like GE.
I´m with you: Most of the cases a sell is not a good idea. The main reason is, that we sell at low prices because we are concerned about the development of the company. That´s a big source to lose money, because the prise is depressed, we feel bad (emotional decision) and we feel better when we sold out the company and don´t need to think about it anymore. Even if a company get bankrupt, it may be annoying, but overall if you have a big variety of companies it doesn´t harm you a lot. In my case if GE will go bankrupt, I will lose the remaining 800 $. I lost the rest of the money at the moment anyway, so I´m only able to rescue a little bit money.
So being lazy is the better way, I agree.
Regards Oliver
Oliver,
Right. I find the selling process to often be more emotional and time consuming. Buying is quite easy. You see a great business at an appealing valuation. You buy. Simple. Selling is a bunch of hemming and hawing. I simply have better things to do… like enjoying my life (and being lazy). 🙂
Thanks for adding that!
Best wishes.
Hi Jason,
Yes, thought about this a lot since being so impulsive/wrong about my Target (TGT) sell as AMZN came along. Dividend grower since 1968 and I hit the sell button…what was I thinking?
Definitely a lesson on being way too hasty on the sell side, based on the assumption that a business won’t respond to a rapid environment change or learn from mistakes made.
By the same token though I’m still hanging in there on LBrands despite it being a screaming sell to the rest of the world, and happy I stuck with WMT so maybe don’t beat myself up too much..
I think once you nail down a good buying thesis and metrics criteria then in all honesty you’re right, sales shouldn’t really be necessary. Just hit the buy button, slap on the sunscreen and go about your life without a care in the world.
Regards,
DN
DN,
“Just hit the buy button, slap on the sunscreen and go about your life without a care in the world.”
Couldn’t have said it better myself! 🙂
Cheers.
Hi Jason,
I like such approach. There is no need to bother with the ongoing movement of the stocks in the portfolio. Let the dividend growth investment strategy do the work while one is enjoying the leisurely and stress-free lifestyle.
You are the inspiration to all! Kudos to your open-minded and honest sharing.
WTK
WTK,
Thanks for the kind words! 🙂
Best regards.
I think it’s brilliant. Not for every situation, but for you.
In the business world you’re taught to delegate, not because you can’t do the task, but because your time is more valuable than the task at hand.
Your’e in the business of life and your time is more valuable than the task of making sure hundreds of sound investments remain sound.
You ENJOY making investments, and you don’t enjoy babysitting investments. Seeings as you are financially free, why do something you do not enjoy?
Cool article!
Rob,
Thanks, man. Sounds like you perfectly understand what I’m saying. 🙂
I like the passiveness of index investing (although, as shown, it’s not all that “passive”). I think it’s something to emulate. I just want that extra income/yield, because even selling off equity/index shares is a process. I’d rather collect my dividends and go about my life. It’s everything I started setting up years ago.
Best wishes!
I love this article Jason. I decided a couple years ago that I was not going to sell any of my stocks, and for the most part, I have stuck to it. I sold GE about 7 months ago, and purchased Apple with the proceeds. I am happy with the businesses I own. Stocks go up and down, but my dividend income has been steadily rising, even with a few dividend cuts (SNR) and some non-increases (CVS), sprinkled in. As always, thanks for writing and posting the article.
Lukaivan,
I hear you. I’ve been in the same situation for a while now, since the turnover rate across the portfolio has been so low. It’s just that process evolving to, in my opinion, its ultimate conclusion.
Glad you enjoyed this one! 🙂
Cheers.
Great article! Do you currently have DRIP setup for all of your stocks?
Red,
Thanks so much!
I don’t currently use DRIP, nor have I ever. I’ve always preferred to selectively reinvest my dividends, although I’m now in a position to where dividend income pays for my entire life. Not a bad spot. 🙂
Best regards.
Nice article, Jason. It’s nice that you mentioned that you are managing your own money and this does not constitute financial advice to anyone .I am a dividend growth investor first. I do things a little bit differently than you. I hold only 14 Canadian dividend growth stocks (for the dividend tax credits on the taxable investments) Note, I am Canadian .I know my portfolio is concentrated but these are all dividend champions and I think of them as 14 businesses. Also, I’ll neve sell unless there is something fundamentally wrong with the company. I have: 2Télécoms, 4 financials, 1 industrial, 5 utilities, 1 pipeline .I hold a small portion of Berkshire as my US/international contrarian play. Keep up the good work. Also, I am managing my own money and would be super comfortable with a 50% market downturn, as I invest for cashflow, not capital gains.
Jamrock,
Sounds like you’re doing what works for you. That’s all that matters! 🙂
Cheers.
Nice article! I like the thinking and approach and the fact that you still “reserve the right to sell”. LT investing is the only way to go – even Buffet would agree. 🙂
The CFO,
Thanks!
It was a relief to write this. I’m already feeling the positive effects as I leave that old mindset behind. 🙂
Best wishes!