Looking to build up a long-term portfolio? Here's the first step every investor needs to take.
Brian Yacktman, CIO of YCG Investments, has some advice for investors.
"I think the very first step is to identify does this business have pricing power? I think that is the single most important thing to understand. Almost all businesses are deflationary over time. Competition and innovation drives down the, the pricing power of businesses over time. And so there the returns on the over the cost of capital shrink. But there are very few, I mean very few businesses that have the ability to maintain pricing power over time. And so we become students of pricing power to narrow it down. And when you're, when you're shopping in a high quality basket of businesses, investors, like I say, they tend to... You tend to get paid a premium to be willing to own boring businesses because investors want to get rich quick. And so they tend to go after the riskier stuff. You learn in academics, in your classes that you have to take on more risk to get a higher return," explained Yacktman.