As my first blog post on this site, I wanted to lay the framework for my investing philosophy. It is with this philosophy that I have invested thus far. As a disclaimer this is only my personal thoughts; if you agree with it or disagree, I understand my views may be different from yours.
What attracted me most to the investing world was the idea of owning a part of a company. In buying a stock, a person is entitled to a part of a company’s success. And if that company gives a portion of its earnings back to people who own shares in their company (in the form of a dividend), in time you can slowly cover the cost of what you initially paid. When possible, I look for companies that I believe will have a long, strong future. I want companies that will pay dividends to its shareholders, so that at least I get something in return for what I put in to buy the share. And I want to hold onto those shares for as long as possible….my goal is to hold onto some portion of shares in each company indefinitely. The idea there is that if the company continues to grow and succeed, each share becomes more valuable with time.
For myself, I feel that if I were to lay claim to a part of a company’s profits, that means I am also responsible for the actions of a company. For this reason I personally try to avoid (as much as possible) investing specifically in companies whose products/services I am morally opposed to. Even if there may be a chance to make money, I would not want to feel like I am supporting an industry I have an ethical objection to.
One industry this rule applies to for me is the banking world. I personally do not like the idea of charging interest on loans. Interest is the money that a loan costs, as recompense for the risk of the loan not being paid back in full as well as to balance the cost of inflation over time. However, paying off interest in addition to the principal of the loan adds to the borrower’s stresses. Compounding interest, when interest payment is charged on the interest, can cause many people to enter bankruptcy over time. And in my own life, the interest added on top of student loan payments makes it seem like I’m running on a treadmill and going nowhere in sending monthly payments that barely leave a scratch on the final bill. Banks make their profit on leveraging their cash and collecting interest on loans. For that reason I avoid specifically picking a banking institution as a company to invest in. It is also that same reason that I will not specifically put my money in bonds.
This is my philosophy for when I individually pick stocks. I do own index funds (which I’m sure have some stake in banking/lending institutions) and my 401K does have a blend of bonds in it (although it is the lowest percentage I can find currently). I have no say in what these indexes or funds have in their basket of companies. But my last philosophy is that I would like to mitigate risk as much as possible. And the best way to protect your money is to invest in indexes, where all the risk is spread as many ways as possible, rather than just hanging on one individual company.
With this in mind, let’s begin!