In today’s Exponential Investor…
- Imagine 50 years
- Hard to imagine tomorrow
- From booze to Band-Aids
In Friday’s podcast, my fellow editor, Kit Winder, and I pondered what would make the perfect stock to own for the next 50 years.
If you missed our episode, make sure to check it out here, I think it’s one of the most thought provoking questions an investor can ask themselves.
It’s thought provoking on a number of levels.
For a start, it makes you think about your own plan and strategy. It’s very difficult to think about the long term game. When you’re bombarded each and every day with so much negativity, it’s hard to really concentrate on the future.
Right now more than ever, it’s even harder to image a future in 50 years’ time because it seems like we’ll never escape the garbage year that 2020 has become.
We all have struggles
Add into the mix of the uncertainty around the covid-19 pandemic, the uncertainty around Brexit, the uncertainty around the political situation in the US, the uncertainty around the tearing apart of the social fabric… that’s a lot of uncertainty.
I mean, I couldn’t even tell you when my son will be able to return to swimming classes. I find that bloody stressful enough – I loved swimming classes with him (he’s not even two yet, so swimming we do together).
I’ll be the first to admit with so much going on it’s really hard to keep upbeat about it all. Last week I struggled to get out of a ‘funk’ that was lingering around me since Monday.
Thankfully a couple visits to the golf driving range and nine holes after work managed to get the mind back on track.
If I’ve got moments of struggle with it all, I’m sure you do too. Everyone does. If you’re struggling at all, feel free to write in to me at [email protected] get whatever off your chest, and I’ll guarantee I’ll respond – it’s a cathartic process.
Anyway, one of the other things that helped me get out my ‘funk’ last week was my podcast with Kit. When we started to chat about the idea of the one stock for the next 50 years it forced me to think about the future.
As bleak as things can seem now, when you really do push out that boat with your mindset, it’s very clear we won’t all be in this situation forever. We’ll come out the other side and there are an amazing number of things to look forward to.
Granted in 50 years’ time I’ll be 87. Fairly good chance I’ll be part machine by then. Bionic enhancements, mechanical AI-enabled joints… it’s not so crazy to think is it? I plan to get beyond 100, with ease. If I’m not still walking around the golf course (even bionically enabled) at 100, then I’ll be so wrong about the technology future in front of us.
I don’t think I’ll be wrong though.
I slightly digress there… I’ll be 87 in 50 years, so I’ll still need to be earning from my investments. I don’t want to rely on the state pension, and by then, who knows if the state will even be able to afford it?
That means the one stock for 50 years is something that I do seriously consider as a segment of my portfolio. It’s something we should all consider. Granted if you’re already 87, well statistically, maybe the 50-year stock isn’t important to you – but it will be important to your kids or more likely your grandkids if you’ve got them.
What stock would you buy for your grandkids today for them in another 50 years?
Well, thanks to a number of people taking some time to respond with their thoughts, we’ve got a few answers to that question. The stocks I’ll mention below are some examples of the stocks people are thinking about when they ask this question.
From what I can see too, there’s some commonality amongst the responses…
Seven examples of the ’50 year stock’
Here’s a list of some of the responses,
- Reckitt Benkiser
- Johnson & Johnson
With Tesla as the exception – of which Kit points out in Friday’s podcast – all of those stocks have something in common. They’re all dividend payers.
That tells me something, something good – that when you’re looking at long term portfolio holdings, it makes sense to have ones that pay out an income.
As I’ve mentioned previously too, over time, like as in 50 years, the right stocks with the right kind of dividend yield can even help you to become ‘capital agnostic’.
That means that if the stock is good enough, profitable enough and entrenched in a way they’ll last another 50 years, then you can effectively not worry about fluctuations in the stock price over time (that will come).
Consistent dividend payers will add back to the return you generate from your holdings. And if you’ve got the capacity where you aren’t in great need of that income, then dividend reinvestment plans (where available) can even build a position long term where you pay yourself back from your initial capital investment.
That of course isn’t always that easy to dig out the kinds of stocks that can deliver that. And you absolutely need a long term runway for it, but it’s possible. Picking long termers that can pay consistent dividends and are deeply entrenched companies that provide goods and services we’ll always need – no easy task either.
Of course we also don’t really know what the futures holds. Smart, shrewd and considered portfolio construction though is key to building real wealth long term. When you think about it, and take steps to putting it into play, I have no doubt you’ll be better off for it.
Editor, Exponential Investor