Tuesday, October 6, 1998

My Best investment
by Tom Kuffel (MontanaFool)

My best investment was a direct result of my worst investment, which was to not invest at all. Sure, I had lots of excuses for not saving. Some were fair, such as putting my wife through medical school and our son through an Ivy League college. Others were worthless, such as a Porsche 928, six airplanes and far too many fattening restaurant meals.

Another factor was my interpretation of Benjamin Graham's writings. This founder of stock value analysis, teacher and partner of Warren Buffett seemed to say anyone trying to get more than 7% per year return was being wildly speculative. Compared to 4% per year inflation, I rationalized, might as well spend and enjoy myself now.

Then a few years ago some glimmers of reality began to intrude my complacency. I was on the wrong side of 50 and didn't have a clue about my retirement. Casting about for guidance produced no help until I happened to catch the tail end of an interview on CNN with two guys laughing and wearing jester caps. I missed most of what they said, except their claim that long-term returns of over 20% were possible with simple mechanical models selecting only Dow Jones Industrial Average stocks.

Thinking this was too good to be true, I bought their book anyway and spent the next six months reading, surfing their web site, double-checking their claims, researching their source data, and in general becoming convinced this wasn't a hoax.

So, two Christmases ago a friend, our son, and I sat around the table, stuffed with turkey, filling out brokerage application forms. I even provided the stamps and mailed them myself to make sure no one backslid. In a few weeks we were all launched on our journey of Foolish investing.

Well, how does a tentative step with a Dow Dividend model equate to my best investment? It doesn't, except that I got my son to start at the same time at the age of 27 instead of my age of 53 years. Since I believe the most important thing a parent can do is to help their children become happy, productive adults, clearly having my son start saving and investing while he still has so many years for compounding to work its magic is the smartest, best investment I am ever likely to make.

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