Wednesday, May 15, 1996

Investment Attitude Advice
by NetNess

Dear Friends,

Last summer my father distributed his stock holdings to his four children in equal amounts, and since that time I have obsessively studied investing in the stock market -- mostly, I admit, through trial and error. The investment broker I use is the same my father used -- Merrill Lynch -- and a guy who has given me uncounted hours of explanations on terms, advice, and, on occasion, a tip. Overall, his advice to me has remained constant: stick with the blue chip stocks and stick with the blue chip stocks and stick with, well, you get the point.

As it turns out, I can't stick with anything, and besides, the first time the DJIA dropped over a hundred points I freaked out and started hammering at the phone, yelling "SELL SELL!!" Against his advice, I sold virtually all of the blue chip stocks I had. And, of course, they came back. Sigh. I invested in all kinds of things, somewhat blindly (somewhat? more like totally). Any stock that was going up was one I wanted, and the minute it headed down I wanted to sell it. My ML guy mentioned that I traded too frequently, and that it was hurting my portfolio. He said I had some good instincts, but little else.

Then I started to follow The Motley Fool, and learned about how to value stocks. The thing is, and I admit this freely, I still can't get excited about EPS and Beta and RS and all that stuff. Maybe it's because I'm a techie, and am primarily interested in NASDAQ stocks. And as near as I can tell, their performance often has little to do with anything other than a bunch of greedy people like me running to join the shark feed on a hot stock. Where can I find patience??

Now, finally, I realize I have learned something. I bought stock in AOL and had a lot of fun watching it rise and rise. And for a couple of days there ... WOW! When it hit 70, I was ecstatic because I knew the earnings information was going to be good news and then ... Boy!! ... watch that stock skyrocket! And it didn't. It got pummeled. And for the first time, I didn't really care, because I knew the company was good. I knew it was a good investment, and I knew that for the most part, the people bailing out of the stocks were the same ones who jumped in hoping for a big shark feed.

I look at my portfolio now and I feel that, with one possible exception, I have faith and confidence in the companies whose stocks I have purchased. Sure, if I had stuck with my father's portfolio, I would be doing okay. But those stocks weren't a reflection of my own knowledge, and in the end, that's what I needed. I did my homework, and now, I hope, I can relax with the investments I've made and as I acquire more money, I can make new ones.

I have done my homework, however. I have spent hours and hours informing myself, but I haven't wasted 10 minutes listening to the daily assessments of the market's performance by analysts. If there was ever a stockpile of useless information, in my humble opinion, it is from that corner. Every day I hear rumors and whispers about interest rates, bond performance, statistics on joblessness, and consumer indexes, and I realize that it is all about as much use as dialing a 900 number and getting your horoscope read or speaking to "your" psychic. If The Motley Fool has taught me anything, it is to look at the management of the company, the product that they sell, and, perhaps, the market share they hold. And, I would add, I believe it is best to invest within sectors about which you are informed. I know nothing about biochemicals, so I'm not about to rush around snatching them up. I do know about the computer and telecommunications industry, however, which is why I feel comfortable with my portfolio.

I don't whine about missed opportunities (at least, not loudly), and I have, in the end, found success through my patience and deaf ear toward analysts.

[Editor's Note: Mary Smith (yes, that's her real name) is a freelance technical editor and support person. She's famous for her Doom exploits (just ask the teenage boys she humiliates on the local bbs) and proves herself deserving of the appelation Fool with today's Fribble, which comes from a post on the Talk With the Editors message folder.]

Transmitted: 5/15/96