Thursday, August 1, 1996

Stock Lottery
by MJPolton

It concerns me at times that some of us are treating investing like a lottery -- looking for the next Iomega, the next Intel, or Microsoft, or America Online, the next whatever. Almost as with lottery tickets, the hope is to "hit it big" on a ten-bagger [where the original investment increases ten-fold]. If this stock doesn't do it, move on to the next, place your bet , buy another lottery ticket. Don't get me wrong; I'm not knocking these stocks. (I own IOMG and INTC.) It's the attitude and lack of diversification that concern me.

I propose that one stock won't make you "rich" fast (I leave "rich" & "fast" for you to define), unless you're rich already or get real lucky AND make a mistake. If you follow the Foolish guidelines and buy 8 or so stocks, what are the odds they'll ALL become two- or five- or ten-baggers? Unless you're a lot luckier than I, or even the Motley Fool portfolio, the chances are slim and none. So if one or two go up that dramatically, only part of your total portfolio gets multiplied rapidly. To make a real killing, you'd need ALL of your portfolio to go up that fast.

Let's see. If you put all of your money in just one small growth stock, and it turned out well, you could make a fortune. That's the ticket! Oops, we are investing here, aren't we? Even in the lottery you only lose a buck at a time.

Transmitted: 8/1/96 10:26 AM (friball)