What it is:
How it works/Example:
InvestingAnswers describes them as "high-quality securities that you can count on for strong, steady returns -- year after year -- all while ensuring you get a good night's sleep."
InvestingAnswers' identifies candidates for "forever" stocks by following Warren Buffett's simple yet successful investing advice: "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
These investments typically share three main characteristics:
- The company enjoys huge (and lasting) advantages over its competitors.
- The company pays investors every year by dishing out fat (and growing) dividends or buying back massive amounts of its own stock.
- The company has a conservativelots of cash) to safely weather any economic storm. (including
In addition, to be a true "forever stock," it must have long-term growth opportunities, strong and lasting consumer demand for its products or services, and excellent management that will increase the value of the company for decades to come.
Why it Matters:
Warren Buffett's philosophy of buying "wonderful companies" has made him the world's greatest investor. Buffett's investment firm, Berkshire Hathaway, which closely follows this investment philosophy, gained +513,055% from 1964 to the end of 2011. By comparison, the S&P 500, including dividends, gained just +6,397% over the same time period.
You can also see some examples of some forever stocks in the following articles:
Forget 1% Bank -- This Alternative Pays Four Times More