While it certainly feels like there is a never-ending stream of new ideas in investing, there are good ideas from the past that should not be ignored or set aside. AAII contributing editor Brian Haughey brought one of those older ideas to my attention with his article in this month’s issue, “Filling Your Coffee Can Portfolio to Stash Away.”

Haughey’s article references a Fall 1984 Journal of Portfolio Management article entitled, “The Coffee Can Portfolio.” In it, investment adviser Robert Kirby advocated for building a diversified portfolio of equally weighted stocks and then not touching it for 10 years.

Kirby used the example of a 50-stock portfolio. There is no magic to that number, but you would want enough stocks to limit the impact of company-specific risks and enough different sectors and industries represented to reduce those risks. You’d also want to do enough research to ensure the companies have good business models and are fiscally sound and the valuations are reasonable.

Once you’ve done all this, you’d place stocks into a “coffee can,” close the lid and not touch the portfolio until 2033.

What would happen if you actually did this? Some of the stocks would really disappoint you. They’d be absolute losers. Some would give you returns about in line with the market’s performance. A few would deliver very high returns. Based on my years of experience, those big winners would not be the stocks you would have guessed when you filled the coffee can.

Would the portfolio outperform an index fund? Possibly. Would it allow you to avoid all the behavior errors associated with too-frequent trading? Absolutely. Would it be low cost? Very much so because you would have avoided transaction costs from repeated buying and selling.

While I don’t believe investors should buy and forget, I believe most can get by looking at their portfolio with much less frequency than they currently are. A once-a-week glance at company news and the A+ Investor Grades (or key ratios you prefer) is enough to keep you adequately informed. Unless you are specifically following a trading strategy, there is no need to look every day.

Many AAII members likely have some version of a coffee can strategy for part of their portfolio. While there might not be a set holding period, there are stocks many of you have bought and held for a long time.

I own a small number of “coffee can” stocks myself. While few in number, they share common traits: strong business models, good management and the fundamentals to ride out periods of economic turbulence. I buy such stocks knowing full well that I’m making a long-term commitment.

We individual investors can invest in such a manner. Advisers, money managers and portfolio managers can’t. They are too frequently judged on short-term performance. Kirby was blunt in pointing this out: “A decade is likely to exceed the career horizons of most corporate executives and pension fund administrators, to say nothing of most money managers.” A decade, however, is not likely to exceed the time horizon of most individual investors.

Use that longer time horizon to your advantage.

An Update on I Bonds

A year ago, in our June 2022 issue, we ran an article by Charles Meyer about Series I bonds titled, “Why I Bonds Have Appeal When Inflation Is Rising.” At the time of publication, I bonds were yielding 9.62%.

In this month’s Illustrating Trends Dispatch, we show an updated table of I bond yields. They are much lower than they were last year. But they are still paying more than what most banks are paying on savings accounts.

If you bought I bonds to tactically take advantage of last year’s high yield, the first-year restriction on selling those bonds has expired or will soon expire. But you will forfeit the last three months of interest if you sell those bonds prior to holding them for five years. So, the decision about what to do rests on what interest you will receive by continuing to hold I bonds and what you could gain from redeeming them and putting the proceeds into something else.

Enhancing AAII.com

Behind the scenes, we’ve been continuing to work on new enhancements to AAII.com. You’ll be hearing about them in the coming months, but you can learn about a few in this year’s edition of Member News. We discuss how we’re making our online mutual fund and exchange-traded fund (ETF) guides easier to navigate, the forthcoming improved AAII Sentiment Survey page and the AAII Community special interest groups we’ve recently launched.

Wishing you prosperity,