One share forever more?

If you had to pick out just one share to invest in for the rest of your life – what would that be, and how would you go about its selection?

No sane investor would realistically follow such a policy, of course, but it’s a very useful exercise in driving your investment thinking.

Firstly, you’d want to watch your costs. There are many stocks and shares ISA(s) to view online so the important things to consider would be the one-off dealing costs, but far more important would be the on-going account management fees as you wouldn’t be dealing at all into the future. It’s amazing how many of the canniest investors around when it comes to stock selection pay relatively scant regard to their own account costs – so make sure you get this right first.

Then, in picking out one investment to hypothetically make provision for the rest of your life, you’d have to take a safety-first approach and you’d have to pick out a company that you anticipated would be able to pay you a healthy dividend forever more.

You’d also want to find a company with an absolutely bullet-proof balance sheet that, ideally, would be available at a discount to its net assets and healthily profitable.

It’s probable that you’d seek a company with a good history of profitability and income paying – whilst simultaneously managing to continually maintain that rock-solid balance sheet. You aren’t interested in “jam tomorrow” promises here, but sound fundamentals and a history in successful delivery.

Furthermore, you’d want to find a company that supplies something absolutely essential to all our lives, like food, warmth, fuel, etc., and which has a good defensible position in doing so.

Now bear in mind that this is all pure hypothesis. No-one in their right mind would advocate such a policy, but it is an interesting hypothesis, nonetheless. As the greatest investor of them all, Warren Buffett once said; if investors acted as if they had a card with just 20 punch-holes on it for their decisions, and these 20 decisions were to be the only investments they’d ever make, they would probably make wiser decisions than most of us actually do – most of the time.

Such a policy would certainly be successful in focussing our minds and if most people acted like they could only ever invest in one company – forever more – then they’d probably do very well indeed. Of course, they’d miss out on the odd sparkling success story here and there of a company whose shares go on to rise meteorically on the back of some technological innovation or major fashion trend etc. But remember that for each one of those companies investors manage to find – there are always nine others that do the opposite.

Overall, investors will certainly tend to enjoy better investment returns from a smaller number of shrewd decisions - so the discipline imposed by a “one share only” hypothesis is a useful one to consider.