Peace In Your Portfolio
How to Build a Calm, Resilient Portfolio with Conviction, Emotional Discipline, and a Long-Term Focus
The holiday season brings both joy and challenges, much like managing an investment portfolio. Today, I’ll explore the connection between peaceful portfolios and Safe Harbor Stocks, along with a preview of upcoming content.
What Is Peace in a Portfolio?
Peace doesn’t mean avoiding problem stocks or price volatility—ups and downs are inevitable. Peace comes from staying unshaken during fluctuations by practicing:
Long-Term Conviction: Understand the businesses you own.
Emotional Discipline: Stay the course through ups and downs.
Alignment of Values: Invest in line with your priorities and objectives.
Do your research, buy at fair valuations, and remember that investing is 90% psychological. As the late Charlie Munger said: “The big money is not in the buying or selling, but in the waiting.”
Conviction and Confidence
What happens when a stock you own sells off? Emotional decisions often lead to selling near the bottom or chasing FOMO-driven rallies. Peace comes from basing decisions on internal understanding, not external noise.
Build conviction in your portfolio through:
Researching companies with strong cash flows, competitive advantages and growth potential.
Maintaining a margin of safety with disciplined valuations and risk awareness.
Drawdowns are inevitable—they’re part of compounding returns. Stick to your priorities and let your understanding guide you.
Emotional Discipline
Emotional discipline is essential, especially during drawdowns or exuberant bull markets. Don’t let FOMO or fear be your investing strategy. Stick to your own circle of competence. True wealth is built over time, not overnight.
As Warren Buffett has articulated several times over the years, asset appreciation has a way of evoking greed and FOMO in ways that compel investors to deviate from their own strategy and objectives.
“People start being interested in something because it’s going up, not because they understand it or anything else. But the guy next door, who they know is dumber than they are, is getting rich and they aren't.” —Warren Buffet
Here’s how to stay disciplined:
Focus on the Fundamentals: Regularly review the financials and the competitive position of each company you own. If a stock drops on news, remind yourself why you invested in the first place and determine whether the thesis remains intact.
Use an Investment Journal: THIS NEWSLETTER is my investment journal! It helps provide accountability and clarity of thought. Document your reasons for buying each company and the KPIs or milestones you are monitoring. Revisit quarterly to re-evaluate.
Limit Market Noise: Check your portfolio only at set times—e.g., 5 minutes in the morning and evening.
Diversify Strategically: Build a balanced portfolio of at least 10-12 companies with complementary strengths, mindful of industry concentration. Too many companies can also become cumbersome to track.
Set Clear Goals: Define long-term objectives like income or growth, and let these guide your strategy.
Practice Gratitude and Learn from the Past: Reflect on your portfolio’s long-term progress and learn from past emotional decisions.
Building a Peaceful Portfolio
Align your investments with your values and goals. For example, I prioritize long-term growth while using a smaller portion of my portfolio for current income. Entry points matter—succumbing to FOMO and buying overvalued stocks (e.g., P/E of 40x or P/S of 15x) would misalign with my strategy.
Conclusion
As we embrace the holiday season, remember that your portfolio can be a source of calm rather than stress. This embodies the essence of Safe Harbor Stocks—a focus on fundamentals, discipline, and alignment as a refuge in challenging times.
Through this newsletter, I aim to share my investment journal, company analyses, and other insights to help you achieve lasting peace in your investing journey.
The Week Ahead
Currently I am working on the following articles below. Some of these will publish in the coming week. Publication of an article does necessarily mean I own it or am considering an investment.
Nu Holdings (NYSE: NU): Brazil-based digital banking platform experiencing fast growth. Interest picked up on social media after a 25% price drop over the last 4 weeks. I am not considering this for my portfolio, but I think it’s worth discussing its risk profile given the recent popularity.
Amentum Holdings (NYSE: AMTM): September 2024 spin-off from Jacobs Solutions (J) that sold off since its IPO. DOGE and recent downward earnings revisions have kept the stock down.
Academy Sports (NASDAQ: ASO): Earnings due Tuesday, December 10th, pre-market. This is a promising company to me with good growth potential and a proven strategic growth plan. The retail industry classification makes this more cyclical. A classical Joel Greenblatt setup.
Eastman Chemical (NYSE: EMN): Solid Dividend Contender with 15 years of consecutive dividend growth and an interesting line to further compounding.
Cash Secured Put Selling: A strategy I use to earn some current income on capital using certain stocks which I am willing to hold for the long term. These stocks do not trade at a price fair enough for me to buy directly. Based on some requests, I will break down my strategy in an article.
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Disclosure: This information is provided for informational purposes only and should not be considered a solicitation or recommendation to buy or sell any securities. The author or entity providing this information may hold positions in the securities discussed. This is not investment advice.