Author Topic: Stocks for a 15-20 Year Hold Time  (Read 2313 times)

bizaro86

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Stocks for a 15-20 Year Hold Time
« on: February 11, 2020, 01:51:47 PM »
I manage very small portfolios for each of my children in Canada's RESP program. It is designed to save for children's education, and comes with a government grant on contributions, as well as tax deferral (and eventual taxation in the children's name). However, the limits are relatively low, and so each year I have a few thousand dollars to invest for each child in their account.

Because of the small-dollar annual investments, I've been trying to do a "keeper" stock strategy to keep trading costs down. Essentially, buying one stock per kid each year and holding it until maturity. Therefore, I'm looking for quality businesses that can reasonably be expected to have decent business results for a long period of time, trading at reasonable valuations. (Simple, right?)

Anyway, my picks so far have been:
Year 1) Canadian index fund
Year 2) Partners Value (a leveraged play on BAM)
Year 3) DIS
Year 4) One kid got CNQ, one got AER

This is year 5 of the portfolios, and I'm not sure where to go next, so I thought I'd throw it open for discussion.

I'm considering Viacom, although I'm not sure if that has the set-it-and-forget-it business quality I'm looking for. I'm also thinking Fedex will be a reasonable compounder after they get past their fleet renewal capex. I still like COST but the price is too high to add here. Probably right now I'm leaning BRK.B, but would love suggestions/comments. I might split between the kids again as well.


cherzeca

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Re: Stocks for a 15-20 Year Hold Time
« Reply #1 on: February 11, 2020, 02:02:14 PM »
spy

longlake95

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Re: Stocks for a 15-20 Year Hold Time
« Reply #2 on: February 11, 2020, 02:02:32 PM »
It sounds like you have an RESP for each kid. You can have a "family" resp, so, I have one account 2 kids. That way you have more $$$ in the account and you can buy bigger positions and diversify. Mine is held with CIBC Investors Edge...probably Canada's worst bank-broker...LOL.

LL

bizaro86

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Re: Stocks for a 15-20 Year Hold Time
« Reply #3 on: February 11, 2020, 02:09:08 PM »
It sounds like you have an RESP for each kid. You can have a "family" resp, so, I have one account 2 kids. That way you have more $$$ in the account and you can buy bigger positions and diversify. Mine is held with CIBC Investors Edge...probably Canada's worst bank-broker...LOL.

LL

Yeah, I could merge it into a family account. Except they're held (by historical mistake) at 2 different brokers and 1 in my name and 1 with my wife. The cost of getting it merged exceeds the present value of the commission stream I expect to pay.

I like this idea anyway, because it isnt very much work, and I think it will be useful as an educational tool when they're a bit older. Both because it is an understandable strategy and because it will show significant gains on single positions, which hopefully helps underscore the value of compounding.

bizaro86

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Re: Stocks for a 15-20 Year Hold Time
« Reply #4 on: February 11, 2020, 02:11:53 PM »
spy

Reasonable choice and would be easy. I have an index fund in there already, want to do one new position per year, and this doesn't seem like an optimal entry point into SPY to me.


thepupil

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Re: Stocks for a 15-20 Year Hold Time
« Reply #5 on: February 11, 2020, 02:12:17 PM »
I would recommend against this path where each kid ends up with very concentrated positions in different stocks. there are situations where this ends poorly.

I know of a situation where grandparents had given two siblings some stocks for education. one siblings account had a big position in GE; another had a big position in XOM. the financial crisis was far more devastating to GE. unintended inequity was the result.

I'd recommend ETF's/indices or berkshire (less likely to have a high variance outcome, but still a single stock) for this purpose.

writser

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Re: Stocks for a 15-20 Year Hold Time
« Reply #6 on: February 11, 2020, 02:19:21 PM »
To get them interested you could also buy a basket of consumer stocks they’d know, i.e. Mattel, Coke, Disney, Google, McDonalds, etc. Add a new one every year. Maybe not the best option from a rational perspective but I always though that would be a cool way to teach kids a bit about investing. You could also buy 1 share of such a company each year and put the rest in an index fund.

Then you can act like an annoying dad every once in a while: “you know, when I buy a happy meal you earn 0.0000001 cents!” etc.
« Last Edit: February 11, 2020, 02:24:26 PM by writser »
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bizaro86

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Re: Stocks for a 15-20 Year Hold Time
« Reply #7 on: February 11, 2020, 02:22:41 PM »
I would recommend against this path where each kid ends up with very concentrated positions in different stocks. there are situations where this ends poorly.

I know of a situation where grandparents had given two siblings some stocks for education. one siblings account had a big position in GE; another had a big position in XOM. the financial crisis was far more devastating to GE. unintended inequity was the result.

I'd recommend ETF's/indices or berkshire (less likely to have a high variance outcome, but still a single stock) for this purpose.

This is something I have considered, and is why I'm planning to mostly do the same positions (3/4 identical right now). These portfolios are already getting diversified and will continue to get more so over time, which should help as well.

The dollar amounts are small enough here that I will make up any differences for fairness purposes. I'm willing to take more risk than an index here, because effectively this money is mine with a long time horizon. It will almost certainly not cover the cost of school/starting-in-life, so I expect to add funds for both from other resources, and this is a small portion of total assets.

Your point about equity is well taken, and you've convinced me to make the positions the same this year/going forward. Even perceived unfairness is probably a bad idea, and it's hard to feel two accounts that are exactly the same is unfair...


Jurgis

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Re: Stocks for a 15-20 Year Hold Time
« Reply #8 on: February 11, 2020, 02:25:22 PM »
I agree with people suggesting indexes. If you don't want to buy SPY or Canadian index, then why not international index? (Yeah, US is gonna trounce rest of the world forever and all that.  8) )

Overall, if anyone is planning to buy-and-forget-and-hodl(sic) for 15-20 years, IMO indexes are the only choice. Even for companies like KO, BRK, MSFT, etc 15-20 year future is unknowable. It's different story if you plan to buy-and-watch-and-infrequently-sell-and-replace. Then BRK maybe. Or any other companies that you like with 5-10 year horizons.

OTOH, theoretically, you could buy a selection of (strong) businesses and mostly-hodl and maybe do OK: https://www.morningstar.com/articles/960641/the-strange-and-happy-tale-of-voya-corporate-leaders-trust . It's quite possible though that it was easier to pick 10 businesses for long term in 1935 than now...  8)
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Gregmal

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Re: Stocks for a 15-20 Year Hold Time
« Reply #9 on: February 11, 2020, 02:49:21 PM »
I would suggest Pure Cycle or Madison Square Garden.

Pure Cycle basically owns the MPC and will reap build out dollars; effectively a large string of one off gains that eventually bridge the gap to the highest quality recurring revenue stream- municipal water servicing. It is 15 miles from downtown Denver/4 miles from DIA and is located in basically the only place left to develop in that MSA. You have tremendous 5-10 year visibility. The only thing that stops it is probably a wide spread economic recession, which history has shown us, probably will effect everything else as well, if not more so.

Madison Square Garden(if post spin, the sports teams) owns one of a kind, trophy assets. Historically, it doesnt matter what decade you start and what decade you end at, sports teams are mind bogglingly good investments. Even lousy ones. Here you get the best ones, at a discount.