Tuesday, January 16, 1996
My Wife Is a Foolish Woman
by GRunkle

Last year, when we sold the house in Maryland that we'd left behind in the last recession, my wife and I finally had some money to invest. Hey, when you've paid out half your income on debts, and all of a sudden those debts go away and you have a little extra cash, why not invest it? Little did we know that a "contest" was developing between us.

My first step was to take my old 401K out of the IRA Annuity my insurance agent had sold me (I hear the collective groans, but believe me, he SOUNDED like he knew what he was talking about at the time). I put that money into a brokerage account, and excitedly made my first big investment: a software company recommended in Value Line's OTC Special Situations. Never mind that I'd never heard of the company, and had no idea what they did. The stock promptly fell in half, and the next issue of Value Line downgraded it to a "hold". Thanks guys. I also bought Morrison Knudson. It fell in half too, and I sold in a panic. I also lost money in a few other stocks, but less spectacularly.

Now to my wife---this makes me sick. She bought one share of McDonalds so we could get into their Dividend Reinvestment Plan (DRiP). Rationale: they're popular with kids, and on our trip to Europe all the McDonalds we saw were packed. She figured if it's good enough for the fussy English, it's good enough to buy. She started investing regularly in the DRiP, and I think she's now up over 30% counting every monthly investment. She likes Coca Cola, too, so I bought it in my brokerage account and it's way up. She bought Rubbermaid because she likes their products and saw that everybody in the neighborhood was buying Rubbermaid trash cans. Their price went down like a rock, and she bought more shares in their DRiP (no commissions for the Wise). Now it's going up, and she's making money. Recently she added Proctor and Gamble (good Pittsburgh company), and wants Hershey (likes their candy, was impressed with their factory).

Not to say that all she bought were household product companies. She bought Microsoft early last year, too. Why? All my software is Microsoft, and she saw how eagerly I waited for Windows 95 to come out. I had also told her about seeing Windows in Norway, and she saw Microsoft displayed prominently in every computer store here and in Europe. So she made money again.

Overall, my wife has returned---let me go to Quicken and check---she has returned 16% total on money she put in every month since January of last year (26% if you count the Texaco stock, but I still say that was MY pick). I won't go into the math, but a total return of 16% in a year on equal regular investments would require about 27% annualized return. I'm not going to bother calculating the annualized return with the Texaco stock, since it really WAS my pick. Since her investments have been higher in recent months (after we paid off the European Mastercard bills), she has done well in excess of 30% annualized returns. How have I done? Well, I don't think we're talking about me in this Fribble.

What's my wife's secret? She only invests in what she knows about. No obscure software company recommended by the Wise for her. She only invests in companies with long-term growth potential, and she has to like their product. She also doesn't panic. She didn't sell Microsoft when it got hammered when Windows 95 missed its original release dates (Microsoft is her only non-DRiP stock by the way). Finally, since she's mainly in DRiPs, she invests for the very long term and avoids paying commissions. Pretty Foolish system, I say. Of course, I am not going to let her beat me, no sir. I now put all my money in the DRiPs she selected. Because, well, if you can't beat 'em, join 'em.