Morris Bricken, Owings Mills, has written a pleasant, thoughtful letter:
We've known each other a long time. Reading your column keeps me in constant touch with you, and I enjoy your articles and find them very informative. However, I would truly like to see more of your own opinions, rather than others' quotes. You're an interesting guy, and what you personally say would lend added sparkle to your column. Stay well. Kindest regards."
(Bricken, with his two sons, runs a highly successful worldwide apparel business).
I enjoy receiving letters like this, so instead of quoting others today, I will state my own views:
There's no mystery to successful investing, no blue smoke and mirrors, no magic. It's basically common sense. I don't swing for home runs, just singles and doubles, trying not to strike out. I try to preserve peoples' money and its future purchasing power.
We must realize first that nobody knows whether we're headed for higher or lower interest rates (Federal Reserve chief Alan Greenspan said he didn't know), higher or lower stock prices (famous financier J.P. Morgan once said, "Stocks will fluctuate"), inflation or deflation, prosperity or recession. What we do know is that your money, through your lifetime, must travel through all of those scenarios, so I suggest you follow these principles:
* Keep it simple, stick to quality, invest for the long pull.
* Diversify your assets; don't put all your eggs in one basket. (I feel sorry for people who had most of their money in USF&G; or Maryland National Bank stocks.)
* "Stagger" CD and bond maturities, then stop worrying about which way interest rates will go.
* Frequently make decisions you're uncomfortable with. Don't follow the crowd. Remember that over the years, stocks outperformed bonds, CDs, etc., by 17-to-1.
* Focus mainly on "growth" stocks, not industrial, cyclical issues. (See below).
* To guard against living on a fixed income, buy stocks for dividend growth as well as appreciation. (Brokers have lists).
* When beginning, buy stock mutual funds with strong three-to-five-year records, nothing less.
* Practice "dollar cost averaging." (See below).
* If you can't decide whether to sell a big holding of a "good" stock with a hefty profit, sell half right away, no matter how great it looks. Don't complain about capital gains taxes; be thankful you don't have a loss.
* Before buying "high income" or bond mutual funds, read the fine print.
* If you're young, put 75 percent of your money into quality stocks, the rest in CDs and bonds. If middle-aged, 50-50. If elderly, reverse the "young" proportion.
* Be patient; most investments don't grow for at least a year.
* Seek professional help. Financial advisers don't have all the answers, but we know what potholes to avoid. You couldn't fill your own tooth, could you?
MORE ON ABOVE: A "growth" company is one that has aggressive management, compounds its earnings 10 percent a year, plows back much of its profits into research and thereby develops a stream of new products with high profit margins.
"Dollar cost averaging" is a technique whereby you invest a fixed amount of money, say $1,000, in a stock or mutual fund at fixed intervals, maybe every six months. When your investments drop, you get more shares for your money. The secret is to continue regularly through thick and thin.
ENDPAPERS: When investing, keep inflation in mind; receiving the same income every year will not protect you against the rapidly rising cost of living . . . "Don't try to buy at the bottom and sell at the top; this can't be done -- except by liars." (Bernard Baruch).