One of my great God-given talents is comparing investing to almost anything. So, I was cleaning my cat’s litter-box, and it hit me…
Investment portfolios are a lot like a cat’s digestive system!
My cat Louie eats food, gets nutrients from it, and removes what his body doesn’t need. That’s exactly what we should do with our investments!
We “eat” stocks by buying them, “digest” them by holding them and maybe getting dividends, and sometimes, we need to “expel” the ones that aren’t helping us anymore.
Take Leggett & Platt (LEG), for example. I owned it for a while because it was a dividend king, but when declining sales, a crazy-high payout ratio, and growing debt led to a dividend cut, I knew it was time to push it out of my portfolio.
Spring cleaning isn’t just for your house! Your portfolio might have some “crappy” investments sitting in there too.
Did you know our bodies always have bacteria—some good, some bad? We’re healthy as long as the bad stuff stays at super low levels.
This is exactly like owning an ETF like VOO or VTI!
Vanguard.com
When you buy VTI, you get the 500 biggest companies in America (VOO), plus thousands of smaller ones (3,598 currently, to be exact). Apple (AAPL) makes up 6.16% of the entire fund – that’s like one of your vital organs!
But there are also tiny companies that most people have never heard of.
Vanguard.com
Check out Ocean Biomedical (OCEA), a biopharmaceutical company focused on discovering and developing therapeutic products in oncology, fibrosis, and infectious diseases in the United States. It’s so small that Vanguard lists it as 0.00% of VTI. But how small is it really?
Vanguard.com
When I did the math, Ocean Biomedical (OCEA) makes up only 0.00000077% of the entire fund! That’s $13,158 in a $1.7 trillion portfolio—like having a single bacterium in an Olympic-sized swimming pool!
SimplySafeDividends.com
This tiny biotech company has a market cap of just $6.89 million and trades for pennies per share. Yet VTI still owns over 243,000 shares!
The beauty of these ETFs is that even tiny companies serve a purpose. Just like beneficial gut bacteria help our digestion, if OCEA suddenly discovers a miracle treatment, we’ll be glad to own a sliver of it – even at just 0.00000077% of our portfolio!
This is why we always say that when you buy ANY ETF, you’re really buying the methodology that picks the stocks, not the specific companies inside.
Now, owning individual stocks is different. That’s like choosing exactly what food to eat. You think you know what you’re getting, but sometimes there’s hidden bacteria that turns out to be toxic.
If you own individual stocks and one turns sour, you better grab that pooper scooper and clean it out! Unlike with ETFs, you actually CAN control what stays in your portfolio.
So take a good look at your investments this spring. Is there anything that needs to be scooped out and tossed away?
Thanks for reading my weird investing shenanigans today! Hope you had a laugh and even learned something new.
I promise my next newsletter won’t be inspired by cat poop. Maybe.
That’s it, and I’d love for you to reply and share what stocks you’re thinking about pushing out of your portfolio. I’ll respond to every reply!
😁THANK YOU to all who responded to the last newsletter!!
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