7investing Team Podcast: How We Manage Our Portfolios | 7investing
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7investing Team Podcast: How We Manage Our Portfolios

March 25, 2021 – By Simon Erickson

At 7investing, we make seven stock recommendations each month and then invest real money into every single one of our picks.

Our recommendations scorecard is a direct representation of that equal-weight portfolio we have created. Our “Rec Price” column is the actual price that we got when we purchased those positions.

Yet some of the most common questions we receive from our subscribers are related to asset allocation:

  • “I only have so much cash available each month. Which of your recommendations should I actually buy?”
  • “Do you have a higher conviction in X company or in Y company?”
  • “You all make quite a few recommendations! How many total stocks should I hold in my portfolio?”

These are all excellent questions. Yet they’re also very difficult for us to answer, since they tend to hinge on being considered personalized financial advice. We believe investing is personal, and we’re not ones to tell you what you should do with your money.

However, it’s fair game for us to share what we do with ours!

In this month’s 7investing Team Podcast, our advisors describe how we manage our own portfolios. We explain what factors lead us to buy into certain stocks and then what influences us to add to them over time. We share what “diversified” means to each of us, and even how many positions we each hold in our own portfolios.

In the second half of the podcast, our shares some investing advice for beginners and also some “absolutely not” factors that we avoid at all costs.

Timestamps:

00:00 – Introduction to asset allocation

01:34 – How we establish a new position

07:14  – How we decide which stocks to add to, and what we consider a “full-sized” position

17:26  – How we define “diversification” and how many positions we hold in our portfolios

25:38 – Our team describes a few “absolutely not” factors that we avoid in investing

29:28 – Our team shares a few words of wisdom for new investors to consider

Transcript

Simon Erickson  0:00

Hello everyone and welcome to this edition of our 7investing podcast. I’m 7investing founder and CEO Simon Erickson, joined by my fellow 7investing lead advisors: Dan Kline, Matt Cochrane, Steve Symington, and Maxx Chatsko. Gentlemen, how are we doing this evening?

Matt Cochrane  0:15

Oh boy.

Simon Erickson  0:20

Some of us are in other parts of the country. Some of us are in Las Vegas tonight calling in from hotel rooms. But we’re going to make this happen. Regardless, we’re excited for this edition of our podcast. Because at 7investing every month, we come up with recommendations. And we actually invest in equal stake into each one of our picks. We have a real money portfolio that tracks our performance on actually buying into every one of the recommendations that we make. However, a common question that we get is about asset allocation. People are asking us “well, which company should I buy? And if I do buy into those, how large of a stake should I take?” Now, of course, investing is different for everyone. And those are personal questions that we can’t give personalized financial advice to. But on this edition of our podcast, we are going to share a little bit of light on how we invest in our own portfolios, how we think about asset allocation, and how we determine different qualities of how we establish a position over time. So gentlemen, the first question that I’d like to ask to the group is how do you actually first establish a position in your portfolio? Do you back the truck up right away? Do you add to a position over time? What’s the initial way that you buy into a stock as part of your portfolio? Dan Kline, let’s start with you in Las Vegas for this question.

Dan Kline  1:34

So I don’t put a lot of science into it. Basically, you know, I buy mostly twice a month. I have money transferred every other week when it’s in the account, I usually know, oh, hey, I’m really interested in this new stock. So I tend to buy a $300 to $500 position, depending how much money I’m sitting on in that stock. And will I buy more? Yes, if at another point, I think this is my highest conviction stock, or, boy, I really like what Simon had to say about this stock, I’ll add a little bit. And I’ll do that until I get to about 10-15%. Once I hit that sort of threshold, that’s when I’m probably not going to add any new money. Now I’m not necessarily going to sell if it’s doing well. But that’s when I kind of stop adding new money and there’s no real science to it, I might be a 2% for two years, I might get to 10% in two months, it really depends on what I feel about the company.

Simon Erickson  2:25

Matt Cochrane, it sounds like Dan kind of takes a very small stake upfront. What do you do to start a position?

Matt Cochrane  2:30

Yeah, actually, so I move pretty slowly. Um, you know, and I don’t know, I didn’t always do this, like, when I first started, I just kind of built my portfolio pretty haphazardly. You know, I didn’t really know what I was doing. And I just kind of over time, I kind of learned like, what kind of investing style like suited me best in and what what fit my personality best. So I move pretty slowly. I’m never in a rush anymore to build a position. So I just buy a little at a time. And that first bite can be quick. Even like, before I’m done thoroughly researching the company, you know, but if I’m like, halfway through, and I really like it, I like the price, I’ll just go ahead and establish a small position. Now as I learn more and I don’t like that position, I’ll sell it quickly to those first positions, I can sell pretty quickly. But like, if my conviction grows, I’ll just add over time and so every year there’s some companies, I think I bought every single year for the last five or six years, you know, and, you know, so while I’m a long term buy and hold and sell the long term buy and hold investor, like I do sell small positions quickly, before I’m done with my research, but otherwise, I just kind of add over time. And I personally, I think that as time diversification, you know, you just buy a different values over time. And just like many index passive investors, invest like dollar cost average into the index over time, I do that with many positions.

Simon Erickson  3:53

Steve, the Floridian’s sound like they have a similar strategy. How do you do things up there in Montana?

Steve Symington  4:00

I start small too. Actually I might look at buying a position that’s half a percent to a percent of my total portfolio at any one time, and really, maybe off relative to them the amount of money that I might want to put into the stock in total. And I just take my time, it might take me a few months, it might take me several quarters to kind of get up to the amount that I want to put into it, but I’ll start maybe half a percent to 1% of my total portfolio. And and oftentimes those small positions to start will grow with the fairly large positions kind of on their own and, and I don’t necessarily need to put extra money into them, but I let a lot of the stock’s price action determine when I want to add and and how much.

Simon Erickson  4:50

So Maxx, were three for three on starting small with a very small stake up front. Is that how you generally do things in your portfolio too?

Maxx Chatsko  4:57

No actually. Anytime I’m interested in a company I try to do a hostile takeover bid. So what you want to do is you got to get like 10% within a quarter because otherwise you will file that SEC filing, and then you need to align yourself with other major stockholders.

Simon Erickson  5:12

I knew you were Satoshi and sitting on hundreds of billions of dollars right now.

Maxx Chatsko  5:16

I actually don’t think about what percentage of my total portfolio any position is. But you know, I have a base, I have, like a basic idea in mind of all the positions relatively what they I want them to be over time. But yeah, I usually think about, you know, I have X amount every every month to put in. And then I like Dan said, I kind of know, oh, good, you know, it’s that day of the month, I get to go and buy those, those companies that I’m, you know, waiting to buy since last month. And I just slowly build over time. You know, there’s some of my recommendations I’ve purchased every month since I’ve been here, I’ll probably keep doing that  just to build positions. And it’s, you know, there’s buy and hold, I kind of have like accumulate and wait. That’s my strategy. It’s kind of the same thing. But that’s what I do.

Simon Erickson  6:00

Yeah. And I’ll round it out with it with the fifth boat that says the same exact thing that everyone else said is I typically like to take a small stake upfront, to be about 1% of the portfolio historically, at least for me, just to get some skin in the game. Just to start following the company more closely, I find that if I’ve actually invested I want to learn more about it, I really want to follow the earnings calls more closely. And it makes it more interesting for me to – Dan, go ahead. You had one more thing-

Dan Kline  6:23

I’ll just throw in one quick thing. So there’s one exception to all of this for me, if there’s a company I’m interested in, and it drops precipitously for what I consider a stupid reason, That’s when I buy some. If I had been, you know, investing in Chipotle at the time they had their E. coli scare, which when you really looked at it was a couple of people getting a little bit sick – it was it was inevitable – the company handled it well. But the stock went ka blam. That is a good time to buy. That might be when I take some money transferred into my investing account, you know, and buy up good stuff. Doesn’t happen very often. I’m not a big wait for a dip. But if sometimes, if a dip happens, and you look and you’re like, oh, wait a minute like that, you know, the CEO had the sniffles. And people said he had COVID. Like, there’s no real reason why this should fall. So that I think is a buying opportunity. And I’ll kind of go I’ll call it off cycle to do that.

Simon Erickson  7:14

Perfect. Well, let me use that as a segue, Dan, because there’s another question I’d like to ask. We all said that we start small, we take a very modest initial stake in these in these companies. But we also all kind of mentioned we like to add over time. How do you determine my next question I’d like to pose to the group is how do you determine which companies you’re adding to over time? We have an initial stake and you said, okay, sometimes there’s there’s an opportunity if the stock sells off, but are there any metrics? Is there any factors that you decide? This is a company I want to add to over time? And then my part B of that question is, how large of a stake would you actually put into a company until you consider it? A full sized stake? Dan, you didn’t go and go first with this one?

Dan Kline  7:55

This is one where, you know, I sort of answered that part where it’s 10 to 15%. And for me, it’s very much feel. So I look at my portfolio, and I look at a stock and I go, why do I own so little of this? And then I might look up like what’s going on with the company, or if it’s one one of us is picked, I might reread a recommendation or go over some video. So there’s no massive science to it. For me, I don’t have a big spreadsheet. I don’t but a lot of times, I’m going like, geez, this is what I like. It’s only 2% of my portfolio. And occasionally there are ones where I do have to plan for it. Because I’m not with a brokerage that allows for fractional shares. So there might be something where I’m like, geez, I really want to own some of that. Let’s make a plan. And six months from now, I’m gonna buy a share of that, or whatever it is. But But really, it’s very touchy feely for me with no exact science, at least until I get to that 10% threshold or so. Maxx, you of course, it’s closing your eyes and picking right.

Maxx Chatsko  8:52

Yep, I have a cat that actually just picks all my stocks for me. No, I’m I how do I what was the question again, for just just a free?

Simon Erickson  9:03

How do you decide what you want to add to Maxx? And then what’s a full size position for you?

Maxx Chatsko  9:08

Right, right. So what I do is I invest heavily in a lot of, you know, pre commercial drug developers. Right. So this is actually an important question for how other people might structure their positions here. So a lot of those you know, and you can tell from my recommendations, earlier stage, right, I try to avoid companies that have valuation risks. So all drug developers have development risks, but I’ve been trying to avoid those that are richly valued or have momentum. So that said, I mean, some of them are still pretty volatile, right? There’s no reason they can go up or down 20%. In any given month or quarter year, you have to wait for different inflection points when they cross some development milestone. So I accumulate to a point leading up to some of those milestones. And then, you know, depending on the milestone, if it’s good, even if the stock trade stock price spikes up a lot 40% 50% or more, you know, it’s that’s now more de risk, though than it was when you were first accumulating a position. So then you have to, you know, go back in, and maybe you can buy some more, and you feel better about it. So I have a couple of companies that have big milestones in December of this year. So I’m accumulating up till then, and then we’ll see what happens. And then, you know, maybe, again, early 2020, to be, you know, figuring out different ways to accumulate shares, and maybe they’re at higher prices, and that’s fine.

Simon Erickson  10:25

And what’s the full size position for you, you let it ride? If those if those biotech companies are hitting the milestones and doing what they’re saying, Do you ever cut it back, you just say keep keep letting this grow, as long as it keeps doing a good job,

Maxx Chatsko  10:36

I tend not to trim too much, but I will stop accumulating. So you know, one company I’ve owned. So I bought Fate Therapeutics back in like, late 2019. And I was buying through last summer. And then I was like, Man, this is getting a little, you know, frothy here, and then they have data from like six patients and their valuation exploded. They’re like $10 billion now. So I haven’t bought any shares in over six months, I think. But if they continue to de risk it with other pipeline programs, then maybe that, you know, eight to $10 billion, market market valuation is justified, but I think it is a little expensive. So that kind of blew up. It’s one of my largest positions. I wasn’t really it wasn’t supposed to be that way. Right? Like, it’s supposed to take way more time. So I’ve pulled back from buying, but I haven’t sold any.

Simon Erickson  11:24

Yeah, perfect. How about you, Steve? But what marks a larger position for you? Like, what would you be looking for, as you’re adding to something over time, then what’s the full size steak for you in the portfolio?

Steve Symington  11:33

Um, you know, I start to kind of my eyebrows are raised to once you know, if I see a stock kind of approach around 15 20% of my overall portfolio, I kind of go, whoo, maybe I need to kind of, you know, look at this, but I don’t like to trim winners. Often I found, that question sort of works itself out as other stocks gain along the way, so so you know, and as I added new stocks to my portfolio, so I really don’t like to sell winners, I don’t set any hard ceiling for how large I’m willing to let a company become. And, you know, for the most part that’s kind of naturally sort of selected, which stocks have dominated my portfolio. But part of that’s just that I like to add, you know, repeatedly, consistently, to the companies in my portfolio as my own kind of cash flow allows. So, as I have cash, I like to add to it out, I don’t try and time bottoms or, you know, sell at tops or anything like that. It’s just sort of an exercise in futility. So really, you know, sometimes that might mean, you know, buying a stock that I think has gone nowhere for no good reason. And, you know, generally I see kind of catalysts, it ends up being kind of a coiled spring, or sometimes it might mean like adding to a big winner, which is sort of counterintuitive, right? Where you have, you know, stocks that have really outperformed everything else for a good reason. And, you know, so that’s kind of a tough call, but it’s all on an individual company basis, but no real set limits, I like to stay flexible that way.

Simon Erickson  13:06

Is there any consistency between the largest positions you have? I mean, if you see it coming, it’s 10 to 15%? of they all have one thing in common? Or is it kind of all over the board for you,

Steve Symington  13:15

kind of all over the board. Really, it’s really what I like to do is, when I buy a company in the first place, I buy it at a valuation that I think is attractive relative to its long term potential. So I try not to focus too much on on whether, you know, whether people are calling it overvalued or undervalued right now, you know, and that’s kind of the problem that we have is that too many short term oriented investors are saying this is overvalued. And well, of course, it is, you know, you could have said Amazon was overvalued for the last 20 years. And, you know, people say Tesla is overvalued, along, it’s in, you know, insane run. And it’s overvalued the entire way. But some of the best stocks are. So I try not to focus on that I look at a company’s long term potential. And if I like where it stands today, you know, it’s its market capitalization, its enterprise value relative to that long term potential. I’ll buy it, and I’ll just continue steadily adding to that position. So that’s kind of how how I approach you know, determining whether a company’s worth adding to

Simon Erickson  14:18

Matt, Steve mentioned value points there, he said enterprise value to EBIT da that’s that’s kind of similar to something I think you and I have chatted about over the years is that similar to how you add to positions or something different than that these days,

Matt Cochrane  14:30

so actually, so what I generally do like First of all, like as far as position sizing, I want to make stocks earn their position in my portfolio. So to become a significant position in my portfolio, say anything over 5% the stock must do a lot of the heavy lifting there. This is especially true for my largest positions, I keep buying to a point, but eventually like positions need to earn their keep and by that I just mean like they need to do like if I want them. If they’re going to be a large position in my portfolio, they need to earn their way there. And then my large positions, especially by market cost are those that I believe won’t lose a lot of money, rather than ones I think could gain the most, for example, my, like I’ve positioned to pay comm software and Shopify, and they’ve grown so much that they would have been top positions if I had never trimmed them over those valuations, I know draw downs are unlikely. And so I’ve cut them a little on the way up. And so I do give myself permission to trim and add to positions based on valuation, but I never sell out of a position entirely due solely to valuation. And these principles, they kind of naturally steer my portfolios, and my most significant positions are the ones I’ve held the longest, and are those which are most familiar.

Simon Erickson  15:40

Yeah, that sounds great, Matt, thanks very much. And to round this out, you know, with my opinion as well, I tend to kind of have two different styles of companies I invest in I play offense, or I play defense. And the offense portfolio that I run is, you know, what is the addressable market? How well are they executing? And are they still small enough to grow into that. And so companies in that portfolio, I’m willing to let them ride and I actually add normally on the way up, I don’t wait for those companies to sell back down, I will add to a position that’s doing quite well and let it grow, the largest position in that portfolio for me is around 25% right now. And then the other one is, is a retirement account that I really am looking for kind of these perpetually undervalued companies that are paying dividends that I just reinvest over time, because shares are undervalued, largest position size for me, and that is around 15%, I look for steadily rising dividends in management that does what they say they’re gonna do. So some great opportunities, really great perspectives from the milestones, like Maxx was talking about for biotech companies, Matt saying the companies need to earn their position over time and won’t lose money. Steve likes a 15 to 20% stake with really no ceiling value points that he adds to over time. And Dan saying that, you know, he really likes to have a 10 to 15% position in companies. And so I guess my last question is, and we’ve talked about how large a mistake can you get? How do you think about a diversified portfolio? Right? We always think about like, Okay, do I want to have just five stocks? And we’ve got equal weight by cost? And that’s plenty diversified for me, or do I want to have 80 stocks that, you know, you’ve just kind of spread over a really, really wide base of companies to pick from? How do you think about diversified? Do you have an idea of how many positions are in your portfolio? And kind of how do you think about this whole topic of diversification? Dan, let’s go ahead and start with you again, on this one.

Dan Kline  17:26

Simon, this is gonna be controversial, but I like to have 10 good stocks and 10 bad stocks. So it’s only to be fair, it’s 10 companies that I think are going to do well. And 10 that are probably commit No, I’m kidding, I’m kidding. I view my portfolio since joining seven investing two different ways. The first part, which I think there’s about 14 stocks in it now are my picks. These are companies I’ve researched, or companies I cover that I feel really strongly about. The second part of my portfolio is I’ll call them seven investing picks, it’s usually Maxx. But it’s been all of you at some point. And those are companies where either some of them I was inclined to buy and have done the homework. Some of them I if you say the ticker, I don’t even know that I own it until I go look it up. So I view that as a whole separate basket, and that basket might get to 5060 100. I don’t know, because I don’t have to do the research. If it’s time to sell, you guys will tell me to sell. So I know some people want to know everything about every stock they own. And that’s a great way to do it. But I get to work with some of the best stock minds in the world, why would I only buy my picks, and my picks tend to be of similar, you know, they tend to be very, very safe pigs very conservative. It’s not all of them, but a lot of them have been. So if I can add some risks to my portfolio. Now, those aren’t huge buys, unless it happens to be one where I was riding the fence about something and match in a really compelling presentation. And Steve really loves it too. Well, then I might take a bigger position because maybe I felt I made some mistakes and not trusting my own conviction. But in general, two separate portfolios, one that I follow one that is just lots of good ideas from you guys that hopefully will become, you know, Grand Slams, if not more.

Simon Erickson  19:07

Gotcha sounds, good conviction ideas and more speculative ideas. How about Maxx? Chatsko? How do you how do you think about this?

Maxx Chatsko  19:14

Yeah, so I guess there’s two different approaches how I think about it, right, you could do a top down approach. Or you could do a bottom up approach. So if you do a top down approach, maybe you don’t go too into the weeds of any specific company. But you might say, Hey, you know what, I want to own a lot of different genetic testing companies, right? So you might own a basket of those. And a bottom up approach, you might just focus on one of those or two of those or however you do it. So I tend to take a bottom up approach. I’ve explained how I do that before but so I tend to have larger positions in a smaller number of companies. That’s kind of slowly been changing here at seven investing. I’ve bought every pic that I’ve recommended, so I’m right there in the thick of it with everyone else. But yeah, I think it’s easy to stress yourself out thinking oh, I need to own 25 company. Do you need to own 100 companies? You know, you got to find a number that trade for you. And depending on how much money you have in the portfolio where you’re at. So there’s all these different factors that come into play, but I think it kind of comes down to the top down or bottom up.

Simon Erickson  20:14

Okay, that sounds good. How about you, Matt Cochrane, how do you think about diversification?

Matt Cochrane  20:18

Yeah, so I actually think it’s challenging to run a concentrated portfolio and be a long term, buy and hold investor. So I, since I sincerely believe like the best compound that comes from years of holding, I allow myself to hold like, I don’t know, 30 to 40 positions at a time, though, I will start to eliminate positions like above that point too much. But starting small and allowing my portfolio to balloon over 30 positions, kind of permits me just to buy companies I probably would not otherwise have I’m kind of rikka risk averse. So for instance, like I thought I would have ever bought Shopify, which has been like a 13 bagger. For me, if I had some arbitrary rule telling me, like, I have to start as a 5% position, because I can only have 20 positions, you know, so that’s what works best for me. But some, some investors I know, like they, they run a much more concentrated portfolio, and they’ve seen like great returns, and others I know, like, have portfolios with, with literally hundreds of companies, and they to have succeeded wildly. So I really don’t think there’s one size fits all. It’s really I think, just whatever fits your style best. But that’s, that seems what works best for me. I tried to find a happy medium there.

Simon Erickson  21:20

That was our style best.

Dan Kline  21:25

Sorry, Simon, I stepped into there. I said, this is also Matt’s policy on kids. There’s no arbitrary limit.

Matt Cochrane  21:36

I’m gonna have some multi baggers in there, I’m gonna have some underperform.

Simon Erickson  21:41

But we’ll talk about capital allocation with your kids on the next podcast to see what fits your style best for diversification.

Steve Symington  21:48

For diversification, I think not over complicating it is key to me, I think people, you know, spend maybe too much time trying to determine, you know, which sectors they need to place, you know, certain chunks of money, and I just invest in the best businesses that I can find, with a long term mindset. And I try not to worry too much about the number of stocks in my portfolio or you know, diversifying across different sectors. That might mean, you know, relative lack of volatility for some stocks and, and massive volatility for others. But it really depends on what I think is the best ideas at any given time, I will buy them or hold them for with years, you know, the the intention of hanging on to them for four years, and the rest kind of works, works itself out, really, I tend to own between 30 and 40 stocks, but that numbers kind of been climbing, climbing in recent months, as I see kind of more seven investing recommendations in particular that are compelling. And, you know, some of them are very small positions, some of them have turned into very large positions. And it really, I try not to overthink matter of diversification too much. And I don’t mind, you know, a relatively small number, say 10 stocks, you know, might be my comprise, you know, 50% of my portfolio. And the other, you know, 2025 30 might be the rest, but it’s not, you know, it, I don’t want to say it’s not a it’s not rocket science, but it really isn’t, you know, I don’t think we need to complicate it too much in trying, you know, otherwise, I mean, we could go buy an index fund, or something like that. But I think there is some merit to concentrating parts of your portfolio in in high potential industries, because that’s where, you know, you’re finding that alpha and, and you’re really driving out performance that way. So just finding the best businesses, I can buy them hold on.

Simon Erickson  23:54

I agree. In fact, I think one of my favorite parts of the job and working with you guys is buying into each other’s pics. And we do that, and I do that too, you know, I do kind of the same thing that you do Maxx, and on the second of the month, we always publish them first, then I’ll go out and actually buy you your ideas as well. And that’s kind of expanded the portfolio over time, opened my eyes to a lot of stuff that I wasn’t even aware of before some of these companies we bought in recent months. And I won’t give the names out here on the podcast, but I hadn’t heard of them before your recommendations. And that’s saying something for a person who’s worked in this industry for a very long time and thought he knew most of the companies out there, but we’re finding some unique new things. And I’ve definitely benefit from that I have more than 80 positions in my portfolio. I would say the vast majority in terms of dollars is in probably seven or eight of them. I’ve always take a small stake upfront, add the winners and let them run and that kind of takes care of itself over time. I never turned back based on a position size. So okay, so great. So Dan says, you know, he’s got kind of a conviction list. He’s got a speculative list, Maxx says top down versus bottoms up investing. Matt and Steve both saved Kind of 30 to 40 positions look for a diversity of choices. And I want to close this out with one last question. This is a fun one. Again, this is not personalized financial advice. This is just for us managing our own portfolios. But I’ve got to ask this question anyway is what is the absolute No, no, for you running your own portfolio, if there is a filter that you can turn off and say, I am not interested in this sector, or I will not do that. Absolutely. under any circumstance. What would that be in regard to how you allocate money in your portfolio? Steve, I will start first with you on this or what is a no no that you will not do for Steve Symington’s portfolio?

Steve Symington  25:38

I won’t buy penny stocks. That’s that’s one thing that I just I won’t touch him. You know, and we’re not talking like, you know, companies that are 100 million to $200 million market cap those are those are fair game, but I’m talking like little micro cap like trading at a fifth of a penny or something absurd. Yeah, all too often that ends in heartbreak and

Maxx Chatsko  26:00

What you can have, like 10,000 shares.

Steve Symington  26:04

I’ll say share price means nothing the number of shares you own means nothing. We all know this, but it’s worth reiterating. And that’s, that’s really hard to get through. You know, there’s a lot of companies that trade $1,000 a share that I would much rather own and will almost certainly outperform these little tiny penny stocks. I don’t touch penny stocks. That’s that’s a big no no for me.

Simon Erickson  26:24

Perfect. How about Matt Cochrane? Penny stocks are off limits, I assume for you as well. But any other no no’s in the Cochran portfolio?

Matt Cochrane  26:30

Yeah, penny stocks is a good one, you know, no energy, anything dependent on a commodity price. Like that’s just way outside of my comfort zone or circle of competence. And I just feel like there’s there’s too, when a when a company’s like how a company performs is dependent on something outside of its control. I don’t like that. A lot of times I think of energy companies like, you know, they’re so dependent on the price of oil, but it could be any kind of gold mining company, things like that. Just too many things outside, way outside of my circle of competence things outside of the company’s control. And yeah, it’s just not for me.

Simon Erickson  27:07

No penny stocks, no commodities. Dan Kline, what do you stay away from in your portfolio?

Dan Kline  27:12

Yeah, no evil, you know, and here’s the thing that is really subjective. Because there are companies like, you know, obviously, there’s some backlash to Amazon. But do you overall weigh so it’s kind of in my head, like, you know, I won’t own tobacco stocks, but I would own liquor stocks. So there’s no hard and fast rule here. But I try to look at a company and go, does it treat its people well? Is it generally trying to do good in the world? You know, if something goes wrong, and something goes wrong everywhere, how do they deal with that? How do they correct that? So I’m okay with the company being a little bit bad. But when it seems truly evil, then I generally you know, am not proud of owning it. So it there’s just always a better opportunity there.

Simon Erickson  27:54

No penny stocks, no energy, no evil. Maxx, what do you got that you’re staying away from?

Maxx Chatsko  27:58

Well, those are all good things that I also do. So they took all the easy ones. I guess I would say, you know, I really don’t like buy in and sell out really quickly, obviously, obviously, for the tax implications. But if I buy a pic, because I bought them, you know, approach. I do let it ride for a long time, as long as the thesis is intact. So it doesn’t matter if it’s down a lot or up a lot. Like I said, I don’t even trim if it’s you know, spikes for some stupid reason that’s maybe not sustainable.

Simon Erickson  28:27

So not a whole lot of wheeling and dealing in the in the Chatsko portfolio. No short term thinking I like that one. And mind that all I did this is no bad management. I have made exceptions in the past where I would say oh, I really wanted this company. But I don’t like the CEO. Honestly, they’re probably paying themselves way too much money or they’re making bad decisions and not not fulfilling on what they say they’re gonna do. No more, no more. I’m done with bad managers that can light your money on fire before you even know what’s going to happen. So we throw that out the window as well. Great. So okay, so Dan, one more comment. Before we wrap this up. What do you think.

Dan Kline  29:00

As I’ve also said Simon, I also learned don’t buy stock stock from a guy in the street selling it out of a trench coat that is a that is not going to go well you want to go through a licensed broker here in Vegas, you can get anything at any time. Not a great way to buy stock, you want to be really, really careful. Remember that there used to be paper certificates. That’s not really a thing anymore. So I did not buy $10,000 worth of Apple for $100.

Simon Erickson  29:25

Now before we close this out, go ahead Maxx yesterday.

Maxx Chatsko  29:28

What if you know we answer these questions for what we do. But we’ve been investing for a while. What if we real quick went around for people who are starting out? You know, because I’m not gonna have 40 positions or percent allocation. So maybe what’s one tip would go around the horn? For someone who’s just starting a new portfolio? How do they go about it? How do I diversify this? What’s it gonna look like in a year?

Steve Symington  29:51

I’ll start. Yeah, that’s I would say don’t underestimate the ability of starting small like no amount is too small. And in today’s market and given the advent of, you know, $0 commissions and fractional share trading with a lot of brokerages, you know, don’t worry, it’s like, oh, I’ve only got 50 bucks, you know, to put in there, I don’t I only have $100 or something that adds up really quickly. And I’d say don’t underestimate the impact of just getting started and putting in even small amounts repeatedly over time as you can.

Dan Kline  30:28

Yeah, it’s a don’t check your portfolio. Like I saw friends of mine on Facebook today, talking about how the market has taken a pummeling since January, which isn’t true that the Dow and NASDAQ have both hit highs during you know, since then, I think the Dow high was March 12. So we’re not exactly talking about a way back. But if you check your portfolio every day, like you look today and be like, oh, everything’s red. And it’s like, yeah, and yesterday, everything was great. Like, it’s just not that important. You want to watch your portfolio over the course of years, not over the course of months and quarters. And if you’re using advice, like we give at 7investing, if something major happens, we’ll tell you, if it for the most part, this should be set it and forget it. It’s not a game you’re not you know, there are stock market games you could play if you want that aspect of it play a game. But when it comes to investing, buy really good companies, and then just don’t worry about it.

Simon Erickson  31:21

Buy and hold that’s a good one. What do you think, Matt?

Matt Cochrane  31:24

When you first start, don’t worry about diversification at all It can be like, sometimes, like you start off and you have like three companies and you’re like, I’m not diversified enough. Don’t worry about that you’ll get there. You know, start start with companies that you’re used to that you’re familiar with the product that you understand, and take it from there. But like don’t don’t worry about diversification when you first start.

Simon Erickson  31:48

And Maxx, I’ve got to ask you your same question. Let’s bring it back. Now you’ve heard all the answers, you took all the good ones what’s left that you haven’t said yet?

Maxx Chatsko  31:54

I would just combine all of those, those are all really good things. You know, don’t be afraid to start, it always seems like so, you know, a few times when you’re starting out, you only have so much money, or you hear all these other stories of people that are maybe really successful or whatever, you got to start somewhere. You know, I started investing in 2009. I was still in college. And you know, I had like no money, obviously, in college or in my early 20s. But now here I am, I get to do this for a living, right. It’s pretty cool. So definitely, you know, don’t check your portfolio is great advice. I usually only look at my portfolio, like when I put the money comes in, and I go to buy more things. And sometimes I don’t even look at how it’s performing. I just buy the things in logoff. So all really good piece of advice there.

Simon Erickson  32:36

It’s so tempting, right? It’s so tempting to look around with it. When the markets going crazy, and it’s happy and everything is green, you want to wait look at those and you want to see what’s going down and just it really if you’re there for the long term, it doesn’t matter the day to day changes, like you said, those are some great points. Before I wrap this up. We did say that we say no to penny stocks earlier in the program. Dan, you’re out in Vegas, you have not said no to the penny slots. Actually hit it big on a penny slot machine earlier this week.

Dan Kline  33:04

It’s funny. So I said everybody a picture, there’s a slot machine. And I’m not a big slot player, I mostly play blackjack. But if you don’t play some slots, you’re not going to get free rooms, you’re not going to get an all the list. And I played a slot where the winning combination was having three sevens on all the lines, I should have shared this picture because we should have and I was playing it intentionally to try to get that to happen. And it looks like it’s a giant win because I won 200 and you know, whatever 1000 pennies, but it was, it was actually $218, which is fine. It was a nice win. But I did it for the visual of all those sevens on the screen.

Simon Erickson  33:37

I want to see the pictures, I think we have a new logo of Dan in front of the seven machine. Some great advice. So you know from our team just kind of pulling a lot of these together, you heard some common themes that we all said, We said we’d like to buy in small positions up front, don’t feel like you need to back the truck up right immediately. There’s plenty of time to establish and add to those over time. And you also said we look for kind of operational things, right? Whether that’s a a biotech company that’s de risking because of milestones, whether it’s because of certain things we’re looking for, that we see companies doing a good job with, there should be something that gives you conviction that things are going right, other than just the stock prices going up and look for those operational metrics out there. And then the third thing we said that so many of us said on this program is let your winners run. Don’t cut yourself off at the ankles by saying oh, well, this has gotten to be too large of a position I’m just gonna subjectively cut it back. Wealth is compounding over time. And you can really find that some of your best companies and your best largest companies in your portfolio were small positions at the beginning that turned into large positions over time. So thank you to all of my lead advisors from calling in all over the country to for this podcast of our 7investing podcasts on asset allocation. We think it’s an important topic and we wanted to share some of our thinking about that here this evening. So thanks again for tuning in. We are here to empower you to invest in your future. We are 7investing

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