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Don’t Get Even — Get Even Richer!
Plenty of Research Can Avenge Portfolio Losses
You don’t actually have to follow through to get some satisfaction out of plotting revenge after you’ve been wronged; just imagining what you’d do can often get you to a better place. But if you’re aching to avenge your suffering portfolio, Phil Town thinks action might be exactly what you need. His latest book, Payback Time, gives investors a ready-made plan for not just getting even but also perhaps getting ahead.
He says, “Investors who take the correct action now will come out the other side in 10 or 20 years really, really rich.” Following in the profitable footsteps of Ben Graham and Warren Buffett, Town uses a strategy centered on stockpiling, or taking advantage of the current market volatility to pounce on really great companies at really low prices. His secret to success: Never overpaying for a business.
Although Town, author of the bestselling Rule No. 1, says his strategy is hard to explain, he promises it’s easy to implement. “I know that sounds like hype,” he says, “but honestly, it’s impossible to overstate the effectiveness of this strategy.”
To help us understand, Town details his eight Baby Steps to Wealth and includes plenty of examples of how to identify and analyze potential investments. He even gives a timeline showing how many hours the typical investor should put into identifying and researching an industry, then doing the same for potential companies in that industry, to make an educated investment. Curious? It’s a little less than 70 hours the first time through his full process, which includes reading the book.
Town’s ideal targets to stockpile are companies that sell universal, habit-forming products that are cheap to make, cheap to sell, produce huge profit margins and make the world a better place. For those of you counting along at home, that makes six of his top 10 qualities right there. Because he’s describing his ideal business, though, he knows it’s unlikely you’ll ever find an actual company matching all 10. Still, Town’s list offers something to aim for, considering he thinks matching even six of them makes for a wonderful business to invest in — assuming you can buy it at the right price.
The author proclaims his derision for actively managed mutual funds and their high fees throughout the book. Small investors have far better potential for excellent long-term returns than professional fund managers do, he declares with obvious confidence and pride. “I expect 24 percent per year compounded annually from my efforts as a stockpiling investor and that’s what you should expect, too,” Town writes. “Don’t listen to the people who tell you that it can’t be done. The moment you believe you can’t, you won’t.”
If you believe you can, and you’re willing to do the work to get there, a little payback time might be just the weapon your portfolio has been waiting to wield.
Angele McQuade is the author of two books, including Investment Clubs for Dummies. You can find her online at angelemcquade.com.