Let’s be honest – investing in stocks is hard. Add volatility to the mix and identifying the right stocks becomes as good as impossible. But there’s a solution: Coffee can investing.
What is Coffee Can Investing?
The goal of building a coffee can portfolio is to generate solid returns over 5 years or more, with a “buy and forget” approach driven by top stocks with incredible fundamentals and long-term growth potential.
As a result, investors can give their money the chance to beat short-term volatility and inflation.
The approach was popularized through the 2018 book “Coffee Can Investing” by Saurabh Mukherjea, erstwhile CEO of Ambit Capital and the current Founder & CEO of Marcellus Investment Managers.
Exploring the Coffee Can Investing Approach from the Book
“Coffee Can Investing: The Low-Risk Road to Stupendous Wealth” offers an interesting take on long-term investing.
In the book, Mukherjea puts forth the idea of considering your portfolio as a coffee can, where you keep your valuable assets and then forget about them.
Most Indian households have that one tin can, box, or piggy bank that has a large chunk of low-denomination notes and coins accumulated from years past.
That’s the example you should think about when it comes to coffee can investing.
Mukherjea emphasizes the need to have a comprehensive long-term investment strategy.
It challenges the traditional wisdom that may create a short-term perspective and lead to emotional decision-making. You could say that the book and the approach are geared towards practical long-term wealth creation with less stress and emotions.
Benefits and Advantages of Coffee Can Investing
Coffee Can Investing offers several benefits and advantages for investors. They are:
1. Long-Term Perspective
This strategy encourages investors to ride out short-term market fluctuations and capitalize on the power of compounding over time.
By reducing frequent transactions, it minimizes costs and the potential for emotional decision-making.
Not to forget, stocks with strong fundamentals are known to compound well over time, as evidenced by indices like Nifty 50 which include such stocks. Check out the image below to see this growth.
You’ll have to be a disciplined investor if you want to follow through with the coffee can investing approach. Sustainable wealth creation requires time and patience, especially during volatile markets.
Giving stocks time, especially those that have not just solid fundamentals but also a competitive edge/monopoly in their respective domains, may lead to fruitful results in the long run.
3. Minimal Manual Intervention
Coffee can investing eliminates the need for constant monitoring and decision-making. This makes it an attractive option for investors preferring a passive income wealth creation approach.
Coffee Can Investing Stocks from India
Coffee can investing in India refers to the selection of stocks that exhibit solid fundamentals, strong growth potential, enjoy long-term competitive advantages, and have trustworthy company leadership.
The number of these stocks that you eventually hold in your coffee can portfolio will vary. It’ll most likely depend on your financial goals and risk tolerance.
Some like to hold 5 to 7 stocks while others may have 10 to 16 stocks in their coffee can portfolio. That said, the table below shows examples of coffee can stocks based on market capitalization.
Top Coffee Can Investing Stocks in India
|Market Cap (in Cr)
|Tata Consultancy Services
Remember that these stocks only serve as examples, and you must make an investment decision after doing your own research, due diligence, and fundamental analysis.
Building a Coffee Can Investing Portfolio
Here are the steps you must follow to create a coffee can investing portfolio:
- Look for high-quality stocks: Consider stocks from companies with a track record of delivering robust earnings and returns. These companies must have a market cap and should enjoy a sustainable competitive advantage.
- Identify the investment amount: You must decide on the amount to be invested in the coffee can portfolio. You can determine any amount at your convenience but rather than making a one-time purchase, invest in small increments. This approach will help average your purchase cost.
- Make the investment: Use a reliable online investing platform like Dhan to purchase the stocks. They will be added to your Demat account as soon as the settlement process is over.
- Periodically Re-adjust: Some stocks may not perform as desired due to various market-related factors. That’s why it’s important to revisit your portfolio and make adjustments periodically.
Long-Term Success Strategies for Coffee Can Investing
To ensure long-term success with coffee can investing, you must follow these strategies:
- Research: Do in-depth research about the stocks to identify enterprises with strong fundamentals and excellent growth potential.
- Discipline: Adopt a disciplined approach wherein you must overlook short-term fluctuations. Your focus must be on the long-term potential of the stock.
- Diversification: Create a diversified portfolio featuring stocks from a range of companies across different sectors. This approach will help mitigate the risks.
- Review: You must periodically review your portfolio and make necessary adjustments in the wake of any significant developments in the market.
Coffee can investing is a practical approach to creating wealth in the long run with a focus on high-quality stocks and a disciplined approach to achieving your financial goals.
With this approach, you can create a robust foundation for long-term wealth creation. It is a popular strategy that advocates a steady approach and long-term perspective to ensure the growth of your investments.
Every stock, regardless of fundamentals, is always at the mercy of the markets and other factors like inflation.
That’s why coffee can investing requires a focus on in-depth research, diversification, and disciplined portfolio management to achieve your financial goals.
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Why is it called coffee can investing?
Back in the day, folks from the US stored coins, gold, and other valuables in a coffee can that was hidden away. These cans were accessed only when needed, typically in the long term. This is where the investing principle gets its name.
What is the meaning of coffee can?
A coffee can portfolio is a basket of stocks of well-established companies from the large and mid cap categories.
How do you build a coffee can investing portfolio?
- Select 5-16 large and mid-cap stocks with solid fundamentals
- Research them well
- Re-adjust periodically