Self-Taught Investor Andrew Sather Shares the 2 Key Things He Did To Boost His Portfolio
Andrew Sather is the co-host of “The Investing for Beginners Podcast,” which boasts over 1.5 million total downloads. A self-taught investor since 2012, Sather is also the publisher of einvestingforbeginners.com and the daily email newsletter, The Sather Research eLetter. He specializes in identifying value traps and avoiding stock market bankruptcies.
Recognized by GOBankingRates as one of Money’s Most Influential, here he shares the importance of paying yourself first, why patience is key when it comes to the stock market and the best things he did to boost his own portfolio.
What advice would you give your younger self about investing?
The single best thing you can do with your money is to build an investing habit, and start that habit immediately. It doesn’t matter if you don’t feel like you have much to invest — even $20 or $30 a month can compound to great sums over time.
A great example is the first stock I ever purchased back in 2012. I bought a single share of Microsoft at about $27.50. I reinvested my dividends from the company, which turned a single share into 1.1925 shares, now worth over $300.
Pay yourself first so that you continually make progress in building wealth. Set up a reasonable investing habit; I like the idea of $150/month, preferably in a Roth IRA. Pay yourself this at the beginning of the month, rain or shine, employed or unemployed. Over time, you’ll pick up great stocks at low prices which compound into multiples of what you paid for. Do this over the years and you’ll be shocked at how much you can save, and how much wealth you can accumulate.
What is the best thing you did to boost your own portfolio?
When I made the switch to truly understanding the businesses of the stocks I was purchasing rather than relying solely on the numbers, I noticed that my portfolio contained better companies and achieved better results.
Waiting to buy when the price is right has also been critical for me. Buying a stock when it is very expensive will lead to very heavy losses most of the time. When you buy a stock at a fair price, your results more closely track the performance of the actual business, which is what you want. Great businesses will compound their earnings, and over the long term, this will compound your returns.
Also with the stock market, it pays to be patient. The very best businesses tend to be very expensive most of the time, and so, buy great businesses at reasonable prices, and buy the very best businesses when the market is the cheapest.
When it comes to investing for the long-term, what should people focus on?
I think anyone with a time horizon over 20 years should focus almost exclusively on stocks. This is because no matter what time period you examine, stocks have been profitable when held over decades.
But it’s not just about any single 20-year time period. Even if the stock market crashes, that presents opportunities to buy cheaper stocks, which will tend to do even better over their own 20-year-plus time period. With a consistent investing habit (dollar-cost averaging), you can maximize returns over long time periods and be able to accumulate more stocks when the market is down.
If an investor has a time period of 10 years or less, there’s an element of timing involved, and a stock market crash can wipe out your wealth at the absolute worse time (when you need it). In that case, a healthy allocation of bonds is the way to go.
What is the biggest mistake people make when it comes to investing?
Trying to jump in and out of the stock market. We all think we can outsmart the market by timing our entries and exits, but the reality is that stock market crashes are fast and furious, leaving little time (often seconds) to react. Also, the biggest gains come after a day of heavy losses, but some of the biggest losses also come after a day of heavy losses. You can’t win by timing the market.
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Jaime Catmull contributed to the reporting for this article.