The following is an interview with Robert Farrington, who is an investor that also blogs at The College Investor.
1. So tell us a little bit about yourself. You don’t need to get too detailed. E.g. How old are you, what country do you live in, do you have a family, etc.
I’m Robert and I blog at The College Investor. I started this site to highlight saving and investing for young adults and college students. I live in California.
2. When did you start investing? What age? Year? Why did you start investing?
I started investing when I was abut 16. I had some extra money from my first job, and investing always interested me. I remember putting about $500 into my first brokerage account. Its done pretty well since then!
3. So what kind of an investor are you? Are you just trading your pension fund, or are you a full time investor? Approximately how many positions do you like to have at a time? Typically, how long do you hold each investment?
I consider myself an active investor, but I have a a lot of passive index funds as well. I keep a large portion of my portfolio in index funds, and keep a portion that I trade based on my market analysis. For the positions I trade, I would estimate that I hold them 6 months to 2 years. I currently have about 20 positions, which about 8 are actively traded.
4. What is your investment philosophy? I mean, what kind of an investo are you – fundamentals, technicals, trend following, computer trading, etc?
I am a fundamentalist. I stick to investing in companies that have solid fundamentals and are undervalued. I also like to look at companies that are poised to grow over the next few years based on their products and the market.
5. So would you call yourself a successful investor? What kind of investment returns have you experienced on average? How have your investments performed over the past few years?
I would consider myself a successful investor. My three year return on my actively traded positions is 26.43%. The S&P500 3 year return has only been 13.13%. My index funds have also returned 13.25% over the past three years. Over the past 5 years, my returns have been 8.29%, but that compares with -1.68% of the S&P500.
6. Can you tell us about your biggest investment failure? Why you chose that investment, what went wrong, and what you learned?
My biggest investment failure was investing $2,000 into an options spread that I didn’t fully understand. I lost almost all of it. I chose options as a way to hedge some of my risk (it was a spread), but I was still new to options trading and didn’t fully understand it. When the position deteriorated, I didn’t understand what to do, and lost almost all of it. I learned not to invest in investments that you don’t fully understand.
7. Now, on the flip side, can you tells us about your biggest investment success? Why you chose that investment, what went right, and what you learned?
One of my best investment success stories occurred right in the middle of the financial panic. I was able to buy Goldman Sachs at $70 a share. I held that position for over a year and watched it climb back to $150, where I sold. It went higher, but I was happy with my return. I wanted to invest in Goldman because even when everyone was selling bank stocks, I knew this was a great company with great risk management controls. The whole market was in a panic, and Goldman was trading at 0.9 price to book – it had more assets that it was even trading at. I never expected it to recover to where it did so quickly, but I knew that the price level it was at was unrealistically low. I learned that markets panic, and if you buy good companies on fundamentals, you should do well.