What is Coffee Can Investing?
The Coffee Can Investing approach refers to “buy and forget” to investing in shares of companies that have performed well consistently over the years.
The story behind the Coffee Can portfolio traces its roots back to the American Old West. Back then, people would secure their valuables by putting them in a coffee can. The coffee can was then placed under their mattress for safe-keeping, where it stayed for years, or even decades. An investment manager by the name of Robert Kirby proposed in 1984 that investors could follow the same investing strategy. They identify a diversified portfolio of consistently performing companies, invest in their stocks, and keep invested for at least 10 years.
- Above index returns.
- Long-term investing creates a compounding effect, minimizes risks, fetches dividends, and multiplies your wealth.
- Volatility is less in the long term. Therefore, the risk is low.
- coffee can invest can also help investors to save transaction costs in other forms of investment.: You can save a lot of brokerage fees by not chopping and changing your portfolio regularly.
The following pointers should be considered in order to build a Coffee-Can Portfolio:
- 10 years of existence of the company in the market.
- Revenue growth should be at least 10% every year. i.e., the company should have an excellent growth track.
- ROE of at least 15% for 10 years.
- Market capitalization of more than 1 Arba.
- Company should have good brand value.
- The company should be a market/sector leader or have a competitive edge.
- Create a portfolio of at least 10-15 companies. Focus on creating a diversified portfolio.
How to invest?
You can either invest in LUMPSUM or invest using SIP. You can buy in dips as well.
While the Coffee Can strategy is simple, it is quite difficult to follow, because let’s accept it, volatility does affect our decisions while investing, but if you are willing to be patient then this strategy can generate multi-bagger returns for you.
Studies MBBS 4th year at CMCTH,
Likes to call himself a value investor, regularly invests in stock market since 2077.