The Motley Fool: The Fribble

Tuesday, June 30, 1998

The Good, the Bad, and the Aesthetically Displeasing
by [email protected]

I was a Fool before there were Fools, or at least before the dissemination of Folly. It began with a foolish (small f) act. Back when I was young and stupid and nearing graduation, I began running up my credit cards, assuming that I would be able to pay them off as soon as I had a "real" job. (I'd used the things during school, never running too high, but usually carrying a balance, like most people). Like many truly stupid things I've done, part of the explanation starts with: "well, there was this woman..."

So I graduated into the worst job market in ten years. So much for paying off the cards quickly. In fact, I had to struggle just to pay them at all. But pay them I did, slowly, painfully, aware of every single penny of interest that I could have been spending on other things, like food. The Fools can talk all they want of the evils of credit card debt, but until you've realized that you're spending five bucks a day for the "privilege" of being deep in debt and are still scrounging just to get groceries; well, then the lesson sinks in.

Eventually I did get that job. Started going out with a different woman. She provided lesson two in investing, this one not quite as painful to me (but very painful to her). She'd just changed jobs, and had rolled her old 401(k) into an IRA, which she invested in one stock. All of it. One small-company stock that hadn't even come close to showing a profit, and was a long way from viability. She'd bought it on a tip from a friend, and didn't know a balance sheet from a balance beam, or a commission from a commissary.

At the time, I didn't know much about investing either, and she'd already bought the darn thing. For a while all was great as the stock went from about $20 to over $30 in only three months. Not that the company was doing anything; it was just getting bid up. Then it started to drop. Now, three years later, it trades at about $2.

During that time I started reading 10-Ks and 10-Qs off the SEC web site, and learned as much as I could about the company. Eventually, after reading The Motley Fool Investment Guide, I would look again at those filings, and they would reaffirm what I'd thought: stay away, stay far away. When the Fools talk about Huge Fruit Inc., I think of that company.

Meanwhile, at my job, I started my 401(k). Where to put the cash? Choices were a short-term fund, a bond fund, a 'balanced' fund, an index fund, and an actively managed stock fund. Being fairly young, I knew I wanted to put the money in stocks. All of it? Sure, why not. I did some research, saw how well stocks did over the long-term, realized I wasn't going to touch the money for thirty years, so who really cared if the market dropped by 40% tomorrow? (As long as I still had my job.) Looked at the two stock funds. Much to my surprise (again, this was before I discovered The Fool) the managed fund trailed the index over the last several years. So why invest in it? I knew what the indexes had done historically, and didn't know what the heck the manager(s) might do in that other fund.

Sound familiar? Imagine my surprise when I finally found the Investment Guide. Now I don't agree with everything they say, but most of it is so on target it's scary. And my girlfriend is learning. Recently her stock jumped from $1 (yes, it got that low, and she still has it) to $3 on no real news. I told her this, and she said "so what? Nothing really changed, did it?"

She's becoming a little Foolish, too.