Stock Investing Strategies for 40-somethings

The very second post that I ever wrote for this blog just over four years ago was entitled Tips for the Investor Who Started Too Late.  Looking back on it, however, I realize that the tips I gave actually apply to a person of any age starting out in stock investing.

So I’m re-visiting this idea with two goals in mind:  first, targeting a more specific age group and second, walking you through how I’m thinking and making decisions as a late 40-something myself with not a whole lot of time left to my advantage.

My mentality about saving in order to invest

A person in their twenties should be putting at least $100 per month or 10 percent of their net income, whichever is greater, toward buying stocks.  This is my opinion looking back, a personal rule-of-thumb not based on any sort of article or report that I’ve come across.  I believe that number should double for a person starting out in stock investing with each decade. So, a person starting out in stock investing in their thirties should be putting at least $200 per month toward this and therefore somebody starting out in their forties should strive to put at least $400 per month into buying stocks.

People my age have lost a lot of their most precious commodity ahead even that of money:  time.  Warren Buffett or the Gardner brothers of The Motley Fool can tell you all sorts of stories about how time is THE secret ingredient to not just growing, but also multiplying the value of one’s investments.

So $400 may be tough sometimes to come up with or to justify (for example, to people like one’s spouse), but it’s my fault for fooling around with my extra money when I was younger.  Now that I’ve experienced only a small taste of the amazing compounding power of time compared to people who have been stock investing a lot longer than I have, a greater monthly sacrifice is growing more worth it all the time.  The numbers don’t lie!

My mentality about the stocks I’m choosing

As I look at my existing portfolio, here’s the breakdown:  16 U.S. stocks, one Canadian stock, and one Canadian mutual fund in my two portfolios; 3 Canadian stocks, 7 REITs (Real Estate Investment Trusts), and one Canadian mutual fund in my wife’s portfolio.  My strategy for my portfolios:  growth, mostly U.S. stocks.  My strategy for my wife’s portfolio (which she couldn’t care in the least to manage, but who I don’t want to have to answer to if I mess up!):  dividends, mostly Canadian REIT’s.

Even though I’m a Canadian, as a stock investor I’m drawn to the large, dynamic companies on American stock exchanges, hence the number of them in my portfolio.  Looking back over the past several years of (finally) being a successful stock investor, I notice that I’ve gravitated A LOT toward e-commerce and technology stocks.  I’ve also noticed that even though I will hold onto winners for the long term (as I’ve preached many times, just like The Motley Fool), I tend to not have patience with any holding that is earning me less than 10 percent per year and I’m starting to sell these if they remain sluggish after about three years.

When I noticed these trends a few months back, I realized that it was because I’m trying to take advantage of the much less time that I have compared to investors a decade or two my junior.  I’m also trying to make up for all the mistakes that I had made until I was around the age of 40!  I’ve often thought, if I knew then about stock investing what I do now, my portfolios would be in the millions by now.  Alas, I’m still playing a LOT of catch-up, but at least I’m now well ahead of my initial investment amounts.

Anyhow, what specifically draws me to the e-commerce and tech stocks?  First and perhaps most importantly, familiarity.  Even Warren Buffett himself doesn’t invest in anything he doesn’t find simple to understand, so you need to do the same with the companies that you choose to invest in.  What are your areas of familiarity, interest, and possibly expertise?  What products and/or services do you love and many others seem to also love?

In my case, I’m well familiar with e-commerce both as a customer, but I also have some expertise through having operated an online store on a couple of occasions.  (I’ve learned to stick with what I’m actually good at, namely things like investing!)  So I’m familiar with not only the biggest names in e-commerce, but perhaps more importantly also the companies that few outside the investing community have ever heard of that ‘put in the plumbing’ of e-commerce.  The wealthiest people to walk away from the famous gold rushes of the past were not the miners (most of whom blew all their vast wealth), but rather the businesses that supported them:  the guys selling the clothing, food, pick-axes, and the like.

Similarly, the behind-the-scenes companies in e-comm and tech are benefiting right along with the big names that they’re supporting.

What are your areas of familiarity, interest, and possibly expertise?

What are some of these companies?  I don’t like to recommend names of specific companies to invest in much any more; I’m not a trained professional advisor, so visit The Motley Fool ( and better yet, subscribe to one of their stock recommendation services like Stock Advisor or Rule Breakers and get the inside edge that I’m getting on the best, most innovative e-comm and tech companies out there.

The point is that Amazon, Facebook, Apple, Google and the like didn’t use all their own software and technology to make them the tech giants that they’ve become.  They’ve used the products of these behind-the-scenes companies to make their sites and operations the smooth-running operations that they’ve become.

The bonus is that they’ve also provided me with very handsome returns, often within two years of owning them.  In fact, most of them have at least doubled within that time and this is perfect for someone like me who is very aware of my shorter ‘time leash’ with each passing day.

So although most investment professionals preach the necessity to become more conservative as one nears the age of 50 – getting mostly out of stocks and going towards bonds and mutual funds – I’ve taken the opposite approach, always on the alert for the next big growth stock WITH ALSO a potentially great long-term story, and again in the areas in which I have familiarity, interest, and some expertise.

My mentality about buying

I don’t wait for a stock to reach its 52-week low before I buy.  If I did that with most of the stocks that I own, that low would not have come and I would have been kicking myself.

I also don’t generally dicker over the purchase price.  I’ve known people who are waiting until the price goes down to $25, for example, when it’s currently at $25.50 (or even $25.10!).  If they’re looking to buy 100 shares, it just eats them alive to think that they’d have to spend that extra whopping $50 for the stock.  But I’ve also heard those same people wish they hadn’t dickered on price because it never did get down to $25 and it’s now well ahead and they’ve missed out.  They were way more focused on that $50 than the long-term prospects of the stock they were interested in.

Specifically, if a company has been strong, I really don’t care much about what its price chart has been before I buy its stock.  If I’ve missed out on a 30-percent price spike due to a very positive quarterly earnings report, on a few occasions I’ve still bought the stock shortly after because I know for sure that the company’s on fire.  It’s a whole lot better than chasing a company’s price down and trying to “buy the low.”  I’d rather try to catch a falling knife than potentially lose money on a stock whose price has been on a downward trend.  In other words, I very much care about a stock’s price chart if the company has been showing signs of weakness.

That said, I’ll only buy a “hot” stock that has already had a few big price surges if I’ve been convinced, by The Motley Fool and my own knowledge of an industry – and yes, a healthy dose of intuition based upon experience! – that the long-term story of the company (i.e. ten years plus) is still strong.

So many people think that they’ve ‘missed the boat’ on the likes of Amazon, Netflix, Google and others that have had returns in the thousands of percent since their IPO’s (initial public offerings).  However, the next generation of massive winners are currently the stocks that few to none have heard of, trading mostly below $100 per share and quietly dominating the industries and niches that few to none have also never heard of.  Again, these are mostly the companies who are ‘putting in the plumbing’ of those industries and companies that even most non-investors know about, and doing your own research will turn them up before they multiply in value.  And again, I recommend a reputable stock recommendation service to do most of the digging around, the ‘heavy lifting,’ in order to turn these up for you.

The next generation of massive winners are currently the stocks that few to none have heard of, quietly dominating the industries and niches that few to none have also never heard of

My mentality about selling

If you’ve read even only a couple of other posts in this blog, I preach long-term investing because it’s frankly the only historically proven way to ever achieve multiple returns on any stock.  But my mentality has changed somewhat with stocks that stumble around or drop in value in their first year or so.  With these, I’m leaning more toward the mantra of Cabot Wealth Management that advises one to “cut losses short,” in their case suggesting that one sells after a 20-percent loss no matter how positive you feel about a company.

I find it very hard to sell, especially as losses deepen.  I want so much to believe in the long-term picture of any company I buy that I find myself paralyzed when short-term pressures begin to eat away at a company’s stock price.  I’m like the deer blinded by the headlights of something that I had no idea was coming.

I also have too much pride about selling at a loss to the point where I’m much more willing to wait perhaps even several years for it to break even.  Unfortunately, clinging onto such a stock has also meant several years of missed opportunity to have made a solid return in another stock.

The only positive is that, in most of these situations, I haven’t sold at a loss, I’ve just been stupidly patient enough to wait for the rebound.  But again, that money could have been better used by selling at only a 20-percent loss and putting the remainder into another stock that could have hopefully made a positive return.

As with most things, stock investing can become a series of ‘what ifs’ and ‘maybes,’ but the key is to learn from one’s regrets and mistakes and turn them into victories.

I hope that these insights into the inner-workings of how someone in their late forties saves up for, finds, buys, and sells stocks will help you regardless of what age you’re at as a newbie or even an experienced stock investor.

Also, regardless of age, I highly recommend the free e-book, Should You Consider Stock Investing? It could become one of the most beneficial 30-minute reads of your life.

One last thing:  be sure to click the Follow button near the top of this page on desktop or after this post on mobile.  (I don’t post regularly because I believe in quality over quantity, so keep an eye on your Inbox.)

To new beginnings!

Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.