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Thursday, December 10, 1998

Before I Met the Fools

by Mark Panger ([email protected])

Around September of 1993, at 36 years of age, I had decided that it was time to get back into investing (I had made a few disastrous investments in the 80s and I was playing it very safe).

I went to the bank/broker that my wife's family had used for many years and told them I was at their mercy and that I wanted them to handle my money (I know, I know, but I wasn't a Fool then!).

Each year they would give me these statements that led me to believe I was earning around 12% on my investment in their funds. What I didn't understand was that I was heavily weighted in a money market fund and that of course was not earning 12%. But they didn't bother to include those amounts in their calculations. I had tried on several occasions to figure out how they arrived at that 12%. Even after several phone calls, I still did not understand how they did it.

In early 1996 I picked up The Motley Fool Investment Guide. I was energized. I closed out my account and opened one up with a discount broker and started making my trades based on the Beating the Dow method.

After learning about the XIRR function in Excel, I went back and did my own calculations of what my banker/broker was producing for me. I discovered that over the 3 years they had my money (the bull market was in full run during much of this time) my investments grew at a rate of only 6.04%! And they were taking 1% each year on the principal! Since I began investing on my own, I have been earning between 23% and 25% (with $8/trade costs)!

Now I am well aware we have had a good bull run and that my large returns will not sustain themselves over the long run, but they had my money during much of the bull run and I'm still beating them by four times!

I am eternally grateful to the brothers Gardner for their timely teachings and irreverent approach.

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