Adding to the Portfolio
Do you know what makes me happy?
When I can add to Our Stock Portfolio.
It means we can put some more money to work for us.
Today, we will add to 3 (!) positions.
An honest realization
Over the past few weeks, I’ve been thinking a lot about Our Portfolio.
Should we make changes?
Are we doing the right thing?
Are we invested in the best companies in the world?
It’s tough to stay the course when your Portfolio is underperforming the market.
From 1962 until today, Warren Buffett underperformed the market in 20 out of 64 years.
That’s 33% of the time.
And yet… Here’s what an investment of $10.000 would have brought you:
S&P 500: $6 million
Berkshire Hathaway: $3.6 billion
Warren Buffett underperforming 33% of the time…
That’s perfectly in line with the Rule of 3 of Francois Rochon:
The most important quality of a successful investor?
The ability to hold on when things get hard.
Let me confess something, Partner.
I probably never ever want to sell part of my personal investment portfolio.
I want the portfolio to outlast me.
Pass it to my children and grandchildren over time.
This way, you build intergenerational wealth.
It’s probably also why I’m way more immune to short-term stock price fluctuations compared to most investors.
The only thing I care about is the Free Cash Flow the Portfolio generates for us.
You should think about it exactly the same way.
Let’s look at an example:
Our Portfolio currently has a value of $1.3 million.
The Free Cash Flow Yield of Our Portfolio? 5.8%.
This means we are making money while we sleep.
Here’s how much we’re making:
Making $222,47 per day without having to work for it is not bad.
But let’s now make some magic happen…
What if we let the magic of compounding do its work?
I assume Our Companies can grow their Free Cash Flow by 9% per year.
Here’s how much we would make in the future:
In 30 years, Our Portfolio could generate over $1 million in Free Cash Flow every single year.
At a 4% FCF yield, it puts the total portfolio value at $26.9 million.
Fast forward to 60 years ahead… and it grows to nothing less than $85.7 million.
But Pieter… Isn’t it unrealistic to say you’ll invest for the next 60 years?
On the one hand it is.
On the other hand… Warren Buffett is 95 years old. I’m 29. If I’m (very) lucky, I could compound for the next 66 years.
Please note that the above assumes we never add a single dollar to the Portfolio.
Of course we will keep adding to the Portfolio.
This makes things even better.
Let’s make the following assumptions:
Our Portfolio is currently worth $1.3 million
We add $50.000 every single month
We can invest for as long as Warren Buffett
In that case, Our Portfolio would be worth a little bit over $3 billion (!).
Here’s the Free Cash Flow the Portfolio would make for us:
Making $122 million per year in passive income... Sounds exciting!
It’s the power of compounding.
Humans are not made to truly understand the magic of exponential growth.
It’s exactly why this quote is so true:
While we might not have 66 years left to invest, the concept is very clear.
The smartest thing you can do?
Invest in stocks.
The second smartest thing you can do when you already invest?
Keep adding to your portfolio whenever you can.
Every single new buy brings you closer to financial independence.
That’s exactly why I’m so happy to add to three stocks in Our Portfolio today.
Adding to the Portfolio
Today we are adding to three stocks in Our Portfolio: