My name is Andrew Ellis and I am the founder of ThinkingLonger. I’m 68 years old and a retired lawyer. I’m not an investment professional. I’ve never worked for a financial institution and I don’t manage anyone else’s money. You can find me on LinkedIn. I’m not hiding.
I started ThinkingLonger as a way to help my own children invest their retirement funds. It wasn’t a giant leap to realize that their peers needed the same help that they did. And, it wasn’t a giant leap beyond that to realize that incrementally better performance over an S&P 500 Index Fund, could, over time, help a lot of people.
Here was the challenge: Could I get better returns than a S&P 500 Index Fund without the fees for active management, especially active management that didn’t share the risk of loss in any meaningful way? I was unsure of how to achieve my goals.
So, I decided to spend time learning from others.
Let me explain.
“I invest in the S&P 500 Index. I just want to do better with some portion of my money.”
Andrew D. Ellis
Founder of ThinkingLonger
I’m a huge fan of Warren Buffett and his partner, Charlie Munger (and I hope that I get to meet them one day). I think that Warren Buffett is probably one of the smartest men in the world and, luckily for us, he has spent a lifetime sharing that wisdom.
And Peter Lynch also had some important wisdom to share:
“I think you have to learn that there’s a company behind every stock and there’s only one real reason why stocks go up. Companies go from doing poorly to doing well or small companies grow to large companies.”
If it isn't obvious, Warren. Buffett, Charlie Munger and Peter Lynch are not associated with ThinkingLonger.
“The stock market is a device for transferring money from the impatient to the patient.”
“Wall Street makes its money on activity, you make your money on inactivity.”
“The rich invest in time; the poor invest in money.”
“The big money is not in the buying and the selling, but in the waiting.”
“You don’t have to be brilliant, only a little it wiser than the other guys, on average, for a long time.”
“A great business at a fair price is superior to a fair business at a great price”
My search led me to seek a new kind of ideal investment -- a new kind of “winner.” What companies matched up with Peter Lynch’s assessment? Perhaps, a company with a ten year history of at least 20% + average ANNUAL price appreciation might fall within the definition of a company that was “doing well” and/or had grown from “small to large.”
To lock in profits, could I sell these stocks when their 10 year annual price appreciation was not greater than the 10 year price appreciation of the S&P 500 Index by some predetermined amount?
To make my investment decisions easier, I would exclude certain stocks (those vulnerable to domestic and international political events or subject to governmental rate restrictions) and certain cyclicals (definitionally, a group of stocks whose performance was not consistent).
“Time and space are modes by which we think and not conditions in which we live. . .The distinction between the past, present, and future is only a stubbornly persistent illusion.”
Burton Malkiel, author of A Random Walk Down Wall Street, wrote in a blog for Wealthfront, ''Don’t be misled with false claims of easy profits from day trading.''
Our research on long-term performance led to a key observation: stocks with substantial price increases over very short periods of time tend to demonstrate continued volatility – but in both directions!
By cherry-picking super-strong price performers and purchasing at the recommended price, winners over a thirty day period could be sold for a tidy profit.
But what about losers? There was only one answer: every purchase needed a stop loss order equal to 1% of the purchase price. If we were investing $100,000 per month in all positions, we couldn’t lose more than $1,000 per month (100,000 x 1% = $1000) per month. Losses of that magnitude were acceptable and we think Burten Malkiel would agree.
We back-tested our strategy over 312 months (26 years) by identifying price appreciating stocks at different levels of price appreciation (together with certain other variables). Click "Learn More" to see our most conservative projections over that extended period.