I recently had an opportunity to sit down with Randy Warrum, a succesful director at a Fortune 100 company. I wanted to discuss our different investment styles and get another perspective on investing from someone who is on the verge of retirement vs. someone in the journey. He gives some solid advice to younger generations and I share my strategies as well. Here’s a transcript of our conversation. Take a look!
Q. How long have you been investing?
R. Over 50 years in total. My parents started me at an early age. They always taught me the value of saving for tomorrow back while using World War coupons to purchase specific goods and how to ration out their groceries. They taught me to take risks early in life and how to converse money for the future. Today, my investments consist of stocks, bonds, land, and rental properties.
A. That’s really interesting about your parents teaching you so early. My Dad has been on me since I was 10 years old. He would give me newspaper clippings about easy to understand investment stories. One guy starts investing early, one starts later, the earlier one always wins. Simple, but effective.
Q. What’s your current investment style?
R. Definitely conservative. Once I got into my 50s, I started to take risk out of my portfolio steadily by adding more conservative positions like bonds and annuities. My investment portfolio has over 75% bonds now, I pay into a fixed annuity that will pay me a guaranteed $1,000 later in life and my stock selection has mostly large cap companies.
A. I see. Mine is completely the opposite being more aggressive in my 30s I’m taking lots of chances of potential companies. My portfolio is over 90% stocks right now with 10-20% in speculative stocks. I like the Technology and Health Care sectors a lot. I feel that’s where many of our advances in society will be over the next 10 years as people live longer and devices. The will make our life easier through connectivity and advances. Did you know 3-D printing could create a knob for your oven in minutes? No more rushing out to the store.
Q. How has your investment style changed?
R. I mentioned earlier that I used to take lots of risks. I used to buy penny stocks and would hold them for long periods of time until they matured enough to reach the NYSE (New York Stock Exchange) or NASDAQ resulting in much higher valuations. I bought Apple in the low 90s and held onto it ever since, which has increased over 700% in the last 5-10 years. I had to because I can’t afford a 20-30% drop in my portfolio. I worked so hard for it over so many years. I always have to be ready at my age in case I lost my job or something happened. I luckily pulled my money before the tech bubble in the late 90s and also went conservative before the housing bubble. Timing, luck, and some good advice from smart people.
A. Completely agree with your philosophy here. I think as you age, you have to change your style to protect your principal. I don’t personally get into too many penny stocks, I like to see them over at least $5 to see some stability. I’ll be following your model later on as my investments grow.
Q. What advice would you give a younger investor?
R. I would tell them to really take a look at what they are doing with their money. Are they looking into investing, how much debt are they carrying? The extra money they could be making is probably going towards credit card interest. You’ve gotta think long-term. Own property, buy stocks, buy something that will appreciate. Take advantage of your 401k plan at work. If your company offers a matching contribution, take it. It’s free money
A. Spending and debt are tied hand-in-hand. I see so many people in my life that rush out for the new iPhone, spend $600 on it, buy a new car and probably carry a credit card balance. I always wonder if they knew about putting away a little at a time could really add up. I don’t own any property, but it’s on my short list in the next 3 years to do. Any advice on land?
R. Buy what you know. I own land in Kentucky and know the tobacco companies will need it down the line to expand their crops. I’m just sitting on it. Bought it dirt cheap too. It’s a great way to diversify your portfolio beyond the market.
Q. How much have you been contributing to your portfolio that last 5 years? What percent of your salary?
R. Including my 401k, brokerage accounts, and IRA, at least 25%. You never think you’ll have enough. I don’t have a specific number I’m trying to reach, it’s just create as much wealth as possible. I know I’ll have to take care of some of my family, so I’m planning accordingly to more than just for me, but for them as well.
A. That’s a high number. I’m probably closer to 15%. I doubt most folks can afford to do that. I’m trying to get people to start in any facet they can. I think starting with at least the 401k match (generally 5-6%), and starting a retail brokerage account with $50-100 monthly is an attainable goal for most folks to reach.
Q. What are your main investments and how did you select them?
R. First off, I have a bit unorthodox way of picking companies to be honest. I believe to invest in companies that stand for something, have environmental friendly goals, believe in doing the right thing, and have good company culture. My main investments? Well, I mentioned bonds before, but I like stocks such as Apple, AT&T, and Deutsch Bank. I really like the idea of solar panel companies because of their sustainable energy, but given my conservative nature and my age, I don’t know if I’ll invest in them. I’m looking at buying it for my home though. I always thought it would be great for the environment and the carbon foot print.
A. The funny thing you mentioned there is your way of picking stocks. I have two ways myself. The Common Sense Way and the Wall Street Way. Common sense is similar to how you notice companies. I noticed my electric company for example, Teco, gave great service, far better than other power companies provided. I started investing with them monthly because of that and it worked out. I also run stock screeners with different ratios to discover new ideas. I also read a ton on new ideas through books, Forbes, podcasts, and subscriptions to newsletters.
Q. Any other advice for our audience?
R. Consumers spend so much money. Be aware of your expenses. How much stuff have you bought over the years that is gone? How many investments should you have bought that would still be here. Buy stocks. Buy them early and take lots of chances when you can afford to because when you get my age, you won’t be able to take those chances. You can always work more when you are younger to make up for investing in companies that something happens. When you get my age, you can’t do that. Be prepared for anything.
A. Thanks for all your time and words of advice. I expected the investment advice to be completely different and have learned a ton today. Between someone on the brink of retirement to someone like myself in their 30s, I can see the different points of view on this journey. This was an absolute pleasure and thanks for sharing your thoughts today with us.