Investment Style Growth/Drift - How Fractional Shares and Free/Cheap Commissions Accelerated Changes in my Style

[E. Nashton]

For me personally, I spent probably the first decade of my investment journey sticking to deep value investments. Into my 2nd decade, I have moved on to a more robust investment philosophy that more closely aligns to 'go anywhere' style. It's been a bit of a mental adjustment to invest in high growing or non-traditional value investments. But what I found is the move towards fractional buys, cheaper commissions or even free buys/sells has assisted in my transition. Being able to pick up a few shares here and there as starter positions even when by my own metrics the company's seem expensive has allowed me to ride certain waves I would never have executed a decade ago. Examples include investments in Shopify, CRM, AMZN (pre 2018), etc. I thought they were expensive then but I figured I'll buy a few shares and see how it goes. Once I had more skin in the game by owning those shares I did more deep dives and got comfortable with them. Added on dips and just let them ride. 

 

There is of course a debate to be had on whether this is style drift that I will pay for dearly in the next bear market or growth in my investment philosophy that is simply more robust. In all honesty, I got tired of constantly going against the grain...granted I still love me some cheap value plays and I allocate what is comfortable to me to "riskier" growth companies but it is somewhat nice to just let some positions just ride for years rather than buy/selling once it hits some superficial IV I came up with. 

 

Interested to hear from others! 

[WFF]

Free commission has allowed me to:

1.  Purchase positions in small lots, usually averaging downwards vs buying up my entire position in one go.  

2. Allow me to reinvest dividends at a time of my choosing vs scrip dividend

3.  Similar to the above, buying a stater position to do additional research (owner notification mentality) 

[Blugolds]

LOOOOOONG time lurker, first time poster..

 

 

My investment philosophy and trajectory is/was very similar to yours. Also like yours, it has matured and evolved over time as confidence increased as well as portfolio totals. The old "the markets can remain irrational longer than you can remain solvent" played a part in my decisions. I was blessed with the delayed gratification gene for sure...but I still struggle with the Munger like stoicism to sit for a decade on a position until my thesis plays out...it can be tough, and especially so during this run for the last 5 years or so when so many valuations seem illogical to me. 

 

The absence of trading fees has also allowed me to “tip toe” into positions. Determine my preferred percentage for a position and then split up trenches to DCA in should my timing be a little off, that used to bite me, it means sometimes my first trench is the lowest CB and sometimes its the highest, but it beats my past practice and it works for me. This is actually quite ridiculous when I think about it. If I was spending $5/trade on a $5k trench and even if I made 3-4 trenches to full position, it really was insignificant, but I have never really been a “trader” I suppose if someone was making multiple trades each day it would obviously add up. But for some reason it was a mental hold back for me sometimes. 

 

Continuing, I have enjoyed this forum because it has probably helped me look at things through a different lens, more than all the books etc I have read. Reading discussions and thesis, the way of thinking has helped me immensely. I’ll provide an example, the last COST dip I thought seemed interesting, although I thought it still seemed expensive, there was a poster on here (sorry for not providing credit, I don’t remember exactly) that said COST has always seemed expensive, and that they really are best in class, employees are happy and that they are an excellent business. I was already very familiar with them from Mr. Munger, but it was like a slap in my face…someone else reiterating what I was thinking but it was motivation to SWING YOU BUM! That was nearly $200 in share price ago…(no comment on current valuation) but its a name I am willing to hold for decades. A name that previously I would have never bought due to my perceived valuation metric. This forum has increased my circle of competence, (not that it was that big to begin with) and I’m grateful for that.

 

The vast majority of my portfolio is in BRK and the remaining in IVV with the occasional foray into individual names. 

 

I’m certainly not as experienced as many on this forum but hope to be able to at least provide some input into areas I know and continue to learn. I have noticed that some of the “newer” posters ( I should talk right?) seem to be a bit more argumentative/challenging to OG posters and I hope that does not continue and the forum continues to be a place for constructive discussion, there are plenty of social media outlets (FB/SA/ST) for them to argue if they so choose, hoping Para will continue to mod to preserve the quality of the forum as I’m sure he will. 

 

[E. Nashton]

@WFF @Blugolds11 - thanks for the responses. Sounds like we're pretty much in the same boat. The COSTCO example is actually a very good recent example of mine as well. I got in around $320 in Feb of this year based on a retracement from around $390. I knew it was still expensive but I wanted shares in this world class company so I bought in knowing I would DCA if it fell further. It never did and I was able to profit from this investment regardless. Having said that, I am a lot more selective on which type of companies I'm willing to DCA into. I was a bit too liberal about that in the past without making a distinction between cheap and quality. I am also more inclined to invest in asymmetrical bets even if the downside is a complete wipe out of the position (or close to it). I manage the risk with position sizing. 

[Gregmal]

You guys got the gist. Position sizing is everything. No one should be risking more than 5% of their capital on a single idea until they really know what theyre doing. Whereas while you are figuring things out, you can risk 1-2% positions all day long and really its not going to move the needle much either way. If what you are doing is really, really, off base, well...a half sensible investor will get tired of burning their hands on there stove and fix the bad behavior or the flaw in their process. Thats valuable and part of learning. The only way you go broke with sub 5% positions is if you continuously do really dumb shit. Which is way different than just having a few trades go against you. One is part of the game, and the other is the antithesis of it.