No trades for me today. I do think there are some good-looking pitches starting to develop and if/when I swing at them, I’ll let you know of course.
Let’s step back for a moment and try to answer the question I get the most often, especially lately — how do I get started in the markets?
First, I tell people to try to picture the next 10,000 days of their lives and think about how much money they currently have plus how much they’re likely to make and how many demands there will be for that money. Think about the next twenty or fifty years as you make sure that the strategies you’re using for growing your portfolio and your incomes is sustainable.
Second, I suggest they subscribe to one of my services like Revolution Investing where I think we have an edge finding companies that are revolutionizing the world with their technologies.
As I explain to the audience every time I give a speech, when we’re talking about Revolution Investing, we’re not trying to find companies that are just disruptive or taking market share — we’re trying to find companies like Apple and Google and Facebook and Sandisk that are quite literally revolutionizing vast industries as they change our world.
Third, start slowly, especially when markets are near all-time highs, as they currently are. I think the following exchange I had with my old co-anchor from Fox Business Happy Hour, Rebecca Diamond (Gogo), is instructive. She asked me this very question on Scutify this morning:
All Star: RebeccaDiamond: “Cody, I think I will put some money to work too. I have a little bit of funds just sitting in a savings account doing nothing. Not retirement money. Any suggestions?”
Cody: Thanks for asking me, Gogo. I’d suggest starting slow, maybe starting with a tranche-approach of putting 1/5 of the money to work at first and spreading that across a few different stocks. Then you can keep researching the stocks you’re buying and interested in and can buy another “tranche” by putting another 1/5 of the money to work in a couple weeks.
As for names, I always suggest $AAPL and $GOOG as core Revolution Investment holdings. I’ve also personally recently been tranching into $INVN and $SNE, but they are much more risky/volatile than $GOOG and $AAPL are.
Rebecca: “Cody, $AAPL and $GOOG are not too expensive to buy now? Got to set up my trading account too!!”
Cody: I assume you’re talking about investing and not “trading”, meaning you’re planning on becoming a long-term owner of $GOOG and $AAPL stocks. So to answer your #question, looking out five years and ten years and further, I think $GOOG and $AAPL’s respective eco-systems will deliver huge #RevolutionInvesting results.
Cody (cont’d): Looking at closer-term, $AAPL has a $600BB valuation, has $120BB net cash in the checking account, pays a 2% dividend and is trading at 13x next year’s earnings estimates of nearly $8 per share with 10% projected revenue growth. $GOOG has a $400BB valuation, has $60BB net cash in the checking account, pays no dividend and is trading at 19x next year’s earnings estimates of $32 per share, while growing the topline 15-20% next year. For comparison, the S&P 500 is at 17 P/E on say 5% revenue growth.
Cody back in real-time again. So, let’s go back to the original concept of looking out over the next ten or twenty years and why we’d be willing to risk our money on stocks. With Revolution Investing, we’re trying to find maybe ten stocks that will go up 2-3 times in the next decade and maybe a couple that can go up 10-100 times. Remember your goal and remember why you’d be willing to risk your hard-earned money in the markets to begin with. I think those kinds of potential gains are a good reason to invest. I’m not so sure that the potential gains vs the risk of investing in the stock market in general is worth the risk while stocks are at all-time highs.
Apple and Google have indeed been stocks that have gone up 10-100 times since I’ve owned them as well as being stocks that could go up 2-3 times or more in the next decade. They aren’t “cheap” by historical standards, such as at times when they’ve been down huge from their highs in years past. And they’re not “cheap” relative to the broader stock market right now either. But in a bubble-blowing bull market, I don’t know that I’d want to wait for a repeat of such market crashes happening again any time soon.
And again, don’t rush into things. Whether you’re just getting started investing some new money into the markets or whether you’ve been missing the ongoing bubble-blowing bull market for the last few years, there’s no reason to rush in. Start slowly and even if the stocks you’re trying to slowly scale into using tranche buying are running, be patient. You can pay up for the second tranche and wait for a pullback in the stocks before making your third tranche. And even if your timing on the tranche buys are bad as you scale in over the next few weeks and months, if you’re buying the best Revolution Investing kind of stocks, the long-term gains will make the slightly higher average price you paid for the stocks mostly a thing of noise.
Keep perspective on how much you’re risking in the stock market vs how much you’ll be making in your career vs how much net worth you’ve already got and so on.