When I owned individual stocks in my personal account, I never got into the habit of trading.
Studies show that generally, the more you trade, the less you make.
In a recent post, titled “Why I Would Not Buy A Popular Dividend Paying Stock” I suggested that many dividend paying stocks are becoming popular.
For Canadians, their bank stocks, for example have turned into investment Messiahs for the masses.
I wrote the post to play with controversy.
And my friend, Passive Income Earner, caught me out—noticing that I deprecated Johnson & Johnson’s popularity, when not long previously, I had added a few JNJ shares to my investment club at the same price that the shares closed at yesterday.
I’m going to be totally frank. Johnson & Johnson is an amazing business.
And I don’t think it’s overpriced.
But with the sinking value of the S&P 500, it doesn’t present itself as such a clear-cut comparative deal today, compared to some of the cheaper alternatives.
Would you do well to hold JNJ? I think so.
Will it beat the market at the current price? I don’t think so.
This brings me back to my investment club.
As improbable as it sounds, our goal is to continue extending our lead over the S&P 500 index. We’ve done it for nine years in a row.
Will we maintain our streak?
Probably not. But I certainly want to try.
For that reason, I placed our first investment club trade in many years.
I can’t even recall the last time I sold one stock to replace it with another. It may have been Pier 1 Imports in 2005 or 2006, when I realized what a silly mistake it was to buy the stock.
No, buying JNJ certainly wasn’t a “silly mistake” but I’m going to lighten our load, selling 300 shares of JNJ, and picking up 400 shares of John Wiley & Sons stock.
This still leaves our club with roughly $23,000 invested in Johnson & Johnson—proving that I still think it’s a great business, and reasonably priced.
But I’m rolling the dice, betting that we’ll do better with Wiley.
If we’re going to beat the market, we may have to step from the batting cage, and take a swing at a pitch.
What are your thoughts?