- (1:00). – Investing Lessons From Morgan Housel
- (4:20) – The Power Of Compounding
- (10:30) – The Benefit Of Buy and Hold: Long Term Investing
- (19:10) – What Kind Of Stocks Are Good For A Buy and Hold Strategy?
- (28:20) – Episode Roundup: VOO, MSFT, AAPL, GOOGL, BAC, UNP
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Welcome to Episode #264 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.
This week, Tracey is going solo to talk about the hottest new investing book in 2021.
It’s Morgan Housel’s “
The Psychology of Money
”.
Have you read it?
No, it’s not a book on “stock investing.” The tag line describes it as “Timeless lessons on wealth, greed and happiness.”
But the “lessons” are meant to get you to think about money and wealth building.
The book, which is just 242 pages, was so interesting that Tracey had trouble sleeping at night while reading it and can’t stop thinking about it’s “lessons” even months later.
Warren Buffett’s Big Secret
Housel discusses some of the greatest investors of all time in the book.
In Chapter 4, he says about Buffett: “His skill is investing, but his secret is time.”
He’s describing the power of compounding over long periods.
Warren Buffett started investing at age 10. He has been investing for about 80 years.
But every investor has this same “secret” if only they deploy it.
10 Years of Compounding
The easiest way to buy stocks is to buy an index. The
Vanguard S&P 500 ETF
VOO
has a low expense ratio of just 0.03%. It’s 10-year annualized return is 13.4%.
But long-term investors can also buy some blue chip, dividend paying stocks.
Microsoft’s
MSFT
10-year annualized returns, not including dividends, is 27.6%. $1,000 invested in March 2011 would be about $11,442 in March 2021.
Other tech stocks have stellar records including
Apple
AAPL
which has annualized 10-year returns of 27.04%, without the dividends.
But don’t forget about the old economy. Railroad
Union Pacific
UNP
has annualized 10-year returns of 18.56%. It is also paying a dividend, currently yielding 1.8%. The dividend will compound too if you re-invest it.
Even big banks have had a solid decade.
Bank of America
BAC
has a 10-year annualized return of 11%, without the dividend. A 12% annualized return will double your money in 6 years.
What else do you need to know about Housel’s wonderful book?
Listen to this week’s podcast to find out.
[Tracey owns shares of VOO, MSFT and GOOGL mentioned on the podcast in her own personal portfolio.]
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