IT DOESN'T take a complex strategy to succeed in the stock market, financial pros say.
Many of them learned this early, when they bought their first stocks for their own portfolios.
Investing in high-quality companies, holding stocks for the long haul and not panicking at the first whiff of bad news are some of the lessons brokers say they took away when they became investors.
Those tactics work, says Chuck Carlson, editor of Drip Investor Newsletter in Hammond, Ind.
For Carlson's coming book, "Eight Steps to Seven Figures," he interviewed 170 investors whose portfolios over the years had grown to $1 million or more. He found that most have been investors for an average of 30 years. They invested in stocks and stock mutual funds regularly, usually monthly, and held on to their investments for five years or more. They took full advantage of their employers' 401(k) plans.
"It sounds kind of boring, but it's really tried and true investing," says Carlson.
Almost half of American households are in the stock market, through individual stocks or mutual funds. Many are likely to develop tried-and-true investing strategies from their experiences. Here's what local brokers say they learned from their first stock purchases:
Richard Flint, A. G. Edwards
Growing up in the 1950s, Flint was a huge Davy Crockett fan and a faithful viewer of Disney's television shows on the frontiersman. So, when Flint's father was buying stock for his son, the youngster wanted Disney. Instead, his father bought other stocks, including American Research and Development Co. that appreciated enough to put Flint through college.
When Flint became a broker a year and a half ago, he bought his first individual stock. Disney, of course.
Since then, he has seen the price of his 100 shares fall 12 percent.
"The lesson is: Don't buy because you like something; buy for fundamental reasons," says Flint, who still likes Disney and has no plans to dump the stock. He also, by the way, still has his Davy Crockett cards.
George Piendak, Lombard Securities
Piendak was a 12-year-old caddy at a Connecticut golf course when he overheard golfers talk up Hotel Corp. of America. "These guys were good tippers, so I figured they knew."
Piendak poured his caddy earnings into 100 shares of Hotel Corp. at $6 a share. A month later, the stock was trading at $8 share. Piendak held on. He sold it after about a year for $4 a share.
It was a lesson in humility, he says. "No matter how smart you think you are, or how good your recommendations are, or how good your research is, the market can humble you very quickly."
Pamela Koerber, Merrill Lynch
Koerber still owns her first two stocks, Southwest Air and Unisys, although their prices have gone up and down since she bought them several years ago at just under $7 a share. Being clairvoyant, though, would have helped Koerber avoid a huge loss on paper recently on her 1,000 shares of Unisys.
The computer services company, which had traded as high as $49.69 a share in the past year, predicted two weeks ago slower sales growth for the next six months, partly because of customers' year 2000 computer worries. The stock went into a $15.63-a-share free fall, a record tumble for the company. Koerber doesn't see Unisys' problems dogging it for the long-term and plans to keep the stock.
"If it's worth $49 on one day, it's got to be worth more than $24 the next," she says.
"You just have to be patient and think long-term."
Timothy FitzGerald, Ferris, Baker Watts Inc.
On the advice and enthusiasm of some fellow young brokers, FitzGerald bought several hundred shares of Best Buy Co. in December 1994, just before the anticipated onslaught of holiday shoppers. Days later, the consumer electronics retailer said it had failed to meet sales projections, he says. That triggered a sharp drop overnight and about a $3,000 loss on paper for him. "My wife cried," he says.
More bad news followed. FitzGerald bailed out after six months for a loss. Though the stock recovered a half year later, FitzGerald says he made the right move. He put his money into another company that earned him a profit.
"Initially, you hold on and hope things turn around. After a while you realize bad news is bad news," he says. "You can invest on hope, hoping it will come back someday or take the loss and move to something that's good."
Dick Manson, Prudential Securities
It was 40 years ago when Manson first heard about Franklin Mint, which was listed on the now-defunct National Stock Exchange, where Manson's father was a commodities broker. "I liked the story," he says.
A Wharton School dropout launched the company and advertised heavily to create an "artificial scarcity market" for commemorative coins and figurines, Manson says. Manson had been warned against the stock by his friends' fathers, who were bankers. He ignored them and bought 50 to 100 shares for a couple of dollars a share.
The stock shot up, and Manson sold it two years later for about a $500 profit. "When you're young and you don't have any money and you make a profit, you sell," he says.
He should have held on. The stock quadrupled in price before the company went private, he says.
"If you have a good stock, just hold it," Manson says. Billionaire "Warren Buffet would never had made it as a stockbroker. He has only had a handful of stocks and holds them for a long time."
Do you have a personal finance issue of general interest that you would like to see addressed in this column? Contact Eileen Ambrose at 410-332-6984 or by e-mail at email@example.com.