When I was a kid, I setup a self-funded insurance program of sorts that involved buying blocks of high quality, bue chip stocks, locking them away in tax-advantaged trusts, retirement plans, IRAs, and other structures, and letting compounding do the heavy lifting. The goal was to have a backup to the backup so that no matter what I did, I retired wealthy enough to afford anything I wanted. On the blog, this collection of stocks has been referred to as a the “Kennon Retirement Insurance Portfolio”, or KRIP. This page includes a list of the articles that discuss the KRIP and the way I look at long-term investing, using it as a sort of living didactic exercise in practical investing.
One of the biggest dangers an investor faces when he or she decides to buy individual stocks for a portfolio is the temptation to chase something “exciting”, regardless of valuation. That’s a foolish undertaking. Valuation matters a great deal. The exact same business might be a wonderful investment at 10 times earnings but a horrible investment at 50 times earnings. It’s not enough for profits to rise, or dividends to expand; they have to offer a good return, based on what you paid, relative to a reasonable opportunity cost hurdle such as the long-term 30-year Treasury bond yield.
With the discussion of me buying some shares of mining giant BHP Billiton the other day for the KRIP portfolio, there seems to be some confusion about the difference between BHP vs BBL, and how those are related to the BHP and BBL ADR listings on the New York Stock Exchange. This is one of…