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I like the fact that investing in a SIPP allows for a long-term view. As a long-term investor, that aligns well with my worldview.
When choosing shares to buy for my SIPP, here are three things I usually consider.
Continuous change in customer demand
From one year to the next it is relatively straightforward to try and predict demand for a particular industry or company. Yes, there can be external shocks. But in general I think that such estimation is usually not too difficult.
Fast forward ten years, let alone two or three, and things may not be so clear. Many of the biggest companies in the world today didn’t even exist thirty years ago, or they were small.
Given the long-term nature of a SIPP, I weigh such shifts in demand when considering a share investment. That may be because it’s operating in a market that I expect to see gains in demand – or that I think may fall.
Always be balanced
One company that existed three decades ago an apple (NASDAQ: AAPL).
It shows why I believe in long-term investing. If I had invested in Apple three decades ago, in 1994, my investment would be worth it now over 77,000% a lot – even ignoring the benefits I would get along the way.
Is that because Apple was unknown at the time?
No.
The second highest grossing film worldwide in 1994 was Forrest Gumpwhere the title character marvels at the incredible profits he has made as a result of investing in… Apple.
Talk about hiding in plain sight!
But the problem with such amazing success – and to be honest it’s a problem I’d be happy to tackle with my SIPP – is how to stay separate.
Warren Buffett started buying Apple stock a decade ago, but the phone and computer maker’s success and soaring share price meant it took up a large chunk of his portfolio.
That’s bad for classification.
All stocks carry risks. Apple has been successful in the field, but faces risks including a potential tax battle and antitrust concerns over its app store dominance. Over time, staying separate can mean reducing the role of winners in one’s portfolio.
The power of integration
When I buy dividend shares for my SIPP, I consider long-term price prospects, but also what I expect to happen to profits.
After all, great benefits can lead to long-term wealth building when compounded. In my opinion, a SIPP that doesn’t allow me to withdraw money over a fixed period is a good compounding vehicle.
If I invest £1,000 today and it is compounded at, say, 8% per annum, after 30 years I will have grown the value of my investment. more than ten times.
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