How to Make A Vacation Seem Free–Stock Returns
The right stock returns can pay for almost anything.
Jeanna sat on the balcony of the hotel room in Berlin, Germany, and looked at the traffic below. The smile on her face had not left since her plane had landed three days ago. This was day three of a 30-day European vacation. The trip felt free to her.
She chewed on a roll and ate smoked salmon. She still could not believe she was in Germany. The road to her trip started three years before.
Planning & Preparation
She had saved $7,000 and had planned out her expenses for a 30-day vacation in Europe. But she wanted a little more financial cushion before going on the trip.
Mary, a close friend of Jeanne’s, had planned to go with her. Jeanna suggested they wait a couple of years and then go. She did not want to spend all of her cash. Nor did she want to take money from her company’s investment plan for an emergency if she had one.
Mary was reluctant to wait.
Jeanna told her about a friend who invested his money. (That friend was me.) She wanted to ask him about a few investments to save more for their trip.
Mary accused her of gambling to pay for her trip. Jeanna suggested Mary invest too. Mary did not want to wait and left for the trip.
I met Jeanna through David. David told Jeanna that I invested in stocks. They talked about the 30% returns he had received during some years. Jeanna wanted to know if she could triple her $7,000 investment in 1 year. I told her no one could guarantee that. But she could purchase stocks far below their intrinsic value and let them catch up to their value.
After a brief conversation, she told me about her plan to travel throughout Europe for 30 days. She then asked what stocks she should purchase.
David explained to Jeanna that investing was not a get-rich-quick scheme. He told her about the investment strategy that he and I had talked about. She had to do her research and be patient, and buy stocks at the right price. I told her about 2 companies I had researched. She purchased the undervalued stocks of the well-known companies.
Long-Term Investing Means Having Patience
She checked their prices every day. The stocks were volatile for the first six months—up and down. She talked to David about selling them every week. David convinced her each time not to.
When Jeanna’s stocks climbed to a 14% increase in 8 months, she wanted to sell. David convinced her to hold on and let the stocks reach their value. Eighteen months of volatility and the stocks rewarded her with a combined 40% return.
Jeanna sold the stocks after holding them for 20 months for a 51% return.
When I valued the companies’ stocks she owned, their real value had only increased by 5% and 10%. I thought it was time to find stocks with better returns.
Jeanna wanted to buy a stock. David reminded her again about researching stocks. Then he asked me about other stocks for Jeanna.
Jeanna purchased stocks of a retail company and a manufacturer. She also postponed her trip for almost 2 years. She wanted her investment to keep growing.
In three years, Jeanna’s $7,000 investment was around $19,384. About a 177% return. An annual average return of about 59%. Jeanna paid for her 30-day European vacation with part of her stock returns. She left the rest of the funds invested.
Not every stock will return an average of 59%. Some will return more. Others may be much lower.
Knowing what to purchase the stock for makes investing less risky and more profitable.
Enjoy Your Investing
Mo Hicks
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