Monday, April 14, 1997
Easing a New
Fool Into the Market
by
[email protected]
We all know people who are saving money but are afraid to invest in stocks. Maybe your mom has tens of thousands in CDs, or your dad has been stuffing savings bonds into his sock drawer since 1972. For these investors, safety of principal is more important than potential growth.
Here's a strategy to help them inject Folly into their portfolios while protecting principal. Let's say they have $10,000 to invest for retirement. Offer to invest $6,000 in a boring, low-yield, Uncle-Sam-guaranteed zero-coupon bond that pays, say, 6.5% per year. After 10 years this zero will pay off at $10,745. Boom, you've guaranteed their principal. (These are hypothetical numbers. Check the market before you really do it.)
Offer to invest the rest Foolishly. Practice what you've learned on these pages. Mimic your own portfolio, or put them in a starter, index fund or the Dow Approach. Even if you end up investing stupidly for a decade, they won't have lost any money overall. The chances are, though, you'll make them a bunch of money.
It probably won't take ten years for your nervous neophytes to see the light. Pretty soon, they'll want to sell those bonds or cash out those CDs and put their hard-earned dollars into the investments they deserve.
Mark Katzenberger
(c) Copyright 1997, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool.