Forever Stock

What it is:

Forever stock is a term used by InvestingAnswers to describe a stock that you can buy and hold for the rest of your life. 

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."

[InvestingAnswers Feature: 50 Warren Buffett Quotes to Inspire Your Investing]

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 conservative balance sheet (including lots of cash) to safely weather any economic storm.

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:

Investing in excellent companies (like forever stocks) for the long term is not a new concept. But throughout history, it has been a very successful one.  

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:

3 Simple Signs a Stock is Worth Owning Forever

Follow Warren Buffett to the Right Price for Forever Stocks

Forget 1% Bank CDs -- This Alternative Pays Four Times More

Best execution refers to the imperative that a broker, market maker, or other agent acting on behalf of an investor is obligated to execute the investor's order in a way that is most advantageous to the investor rather than the agent.