The concept of Coffee Can Investing is based on a historical American practice wherein people stored their valuables inside coffee cans. These cans were kept safely for many years until the need for those valuables arose.
The term was first coined by Robert G. Kirby in his article The Coffee Can Portfolio in the Journal of Portfolio Management in 1984 based on this historical practice. He applied the same principle of storage investing, where he advocated to investors who desired to increase their exposure to the stock market to buy high quality stocks and hold them for long periods of time, typically a decade or so, and gain from appreciation over longer time periods.
How Coffee Can Investing works
1 August 2025
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Investors can use coffee can investing strategy to pick high-quality stocks from different sectors.
Once they select the stocks, investors should ideally hold them for long periods of time, usually a decade or so. Holding the stocks for longer periods can help investors ride out market downturns and take advantage of long-term profits.
They should ideally select companies which have been in business for at least 10 years and have a good brand value.
Investors should look for shares of companies whose revenue has grown by at least 10 per cent year on year (y-o-y) and return on capital employed (ROCE) has grown by at least 15 per cent, over a period of 10 years.
Benefits Of Coffee Can Investing
The approach leverages the power of compounding as stocks are held for a long time.
It is relatively simple and more accessible compared to other investment strategies, as investors need to put in minimal effort to manage their portfolios.
It saves transaction costs, including taxation, on frequent trades. For example, long-term capital gains (LTCG) are taxed at 12.5 per cent, which is lower than short-term capital gains (STCG) tax of 15 per cent.
It can potentially reduce the risk of selling during short-term volatility, as stocks are held for extended periods of time, thus preventing investors from the temptation to sell and miss out on bigger returns in the future.
Drawbacks Of Coffee Can Investing
Coffee can investing requires patience as investors have to hold stocks even during periods when they erode in value.
Picking the right stocks can be challenging as one will need to select stocks of companies which will be relevant for decades amid a dynamic and changing world.
Often investors may miss out on the opportunity to book profits during bullish market phases, by sticking to this approach.
Coffee can investing requires thorough research about the stocks one wishes to buy. Often investors lack the skill or time for such study and may end up buying the wrong stocks and staying invested in them for long, which could dent their portfolio.
