The Personal Portfolio

Is there a point where one can't call themselves a long-term investor anymore?

Allegory of Fortune, Balthazar Nebot, circa 1730, oil on canvas (Yale Center for British Art)

Note: I’m announcing a change to the publication. Instead of only publishing my top 10 positions to regular paid subscribers, I will now publish all active positions quarterly. I’m looking for ways to improve the value I deliver to readers; this was a no-brainer.

Can one claim to be a long-term investor if their portfolio has a lot of turnover?

I’ve been thinking more and more about this question lately. Warren Buffett and Berkshire Hathaway are the gold standard for buy-and-hold investing, yet the portfolio has much more turnover than expected.

I can’t throw stones, though. I went back through the last ten years of portfolio statements and discovered that I, too, had a lot of portfolio turnover. I currently hold 52 positions, both public and private. Over the past 10 years, I have entered and exited 156 positions.

I could hand waive some of those decisions that led to so much turnover (“those were stocks for tracking other people’s decisions”, “I was obligated to buy based on my previous work”). Still, the bottom line was that I made strategic decisions to allocate capital in that way.

Upon reflection, I don’t think one’s merits as a long-term investor are judged by the companies you sell. Rather, it’s judged more on the ones you decide to keep. While I have exited numerous stocks, I have never trimmed a position I continue to own.

I believe that if one has determined to maintain a position in a company, then maintain the entire position. This goes against the concept of rebalancing that many other investors purport. However, I’m less and less convinced over time that rebalancing (either by portfolio weight or sector weight) is that important if the stock is viewed as an ownership stake in the business itself.

Long-term investing may be an ideology, but it isn’t a dogmatic pursuit.

And now, the personal portfolio.

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But first, I couldn’t go any further without thanking Koyfin for their data and charts, without which I would have much less conviction in many of the companies I have invested. Sign up for Koyfin here and receive 10% off.

Disclaimer: I have an affiliate partnership with Koyfin and receive compensation if you sign up via the link above. It helps me fund this endeavor. I would still recommend using it even if I didn’t have this partnership because it’s an awesome product, but I’d be stupid to turn down a revenue opportunity. You get a discount, Koyfin gets new business, and I get a commission. Win-win-win).