<THE FOOLISH FOUR>

Foolish Four Report
by Robert Sheard

LEXINGTON, KY. (April 8, 1998) -- In honor of The Masters, the first of professional golf's four major annual championships, I'd like to revisit a topic I wrote about better than two years ago -- accountability and the similarities between golf and investing.

Several years before I became a Foolish investor, I took up a similar pastime -- golf. How's golf like investing? Well, I'll get to that in a minute. I'm not completely sure which of the two "games" I prefer these days. The answer probably varies depending on where I am at the time. Right now I'm just breaking out of my winter shell, so I've been taking investing over golf. Put me on a tee box in Arizona or Hilton Head, though, and I might say "Dow who?" I guess my point is that I'm hooked on both, and that's probably because I see the two "games" as so similar.

The first, and perhaps most obvious, similarity is that so many people are so bad at both golf and investing. And I'm not even talking about form and style. No one cares if your grip looks goofy and you wear cut-off jeans and worn out tennis shoes as long as you're driving the ball 270 yards right down the center of the fairway. Your competitors' reaction will only be "nice ball," and then their $250 designer sweaters start to get tighter around the neck as they step up to the tee. What counts is performance. And for golf, as with investing, performance can be measured objectively.

For golf, the measure separating golfers from hackers (a group which claims me as a proud member) is par. If you're breaking par, you're a stud, a scratch golfer, "da man" (to quote some rich idiot who travels to every pro tournament and yells the phrase as each player tees off). The reason breaking par is such an accomplishment is that so few of us hackers out there will ever pull it off. I've been golfing for roughly ten years (off and on), and I've come close once. I was on a streak of really good rounds one summer in college and before it all came tumbling down, I was even par one afternoon, heading to the 17th tee -- a par-3 island hole. No room for error. As any sports fan will tell you, adrenaline does things to you, so when I stepped up to the tee with my usual 7 iron, I was dead before I swung. I was so excited about shooting par for a whole round that the adrenaline was coursing through my body. Splash! I should have hit a 9. Since that day, I've never threatened par again. I'm one of those comfortable golfers who shoots in the 80s.

Amazingly, investing has a similar benchmark that many people lose to -- the Standard & Poor's 500 Index. Like par in golf, the S&P 500 gives us an objective target to aim for, and it takes some intelligence to beat that mark. Most professional money managers and mutual funds don't do it. Most individual investors don't do it. What's amazing about this fact is that for Fools, the S&P 500 benchmark is actually too low! Anyone spending the fifteen minutes a year it takes to use the Foolish Four has crushed the investing game's "par" for decades. And with a little more Foolishness, the standard set by the Dow Approaches can even be bested.

One last likeness between the two "games." Too many people cheat at both. You show me someone who takes a "mulligan" after bad shots, who improves his lie, who doesn't count penalty strokes, who doesn't putt out the short ones, and I'll show you someone who doesn't count commissions and spreads (investing's penalty strokes), ignores his losers, who front-runs his picks in his newsletter, who talks up a stock he's currently dumping to inflate the price. But those aren't "golfers" -- they're "hackers" in expensive suits.

Be Foolish -- break par. Fortunately for us addicted to both games, it's at least reasonable to expect to break par at one of them. Now if I could just get my short-game under control...

Current Dow Order | 1998 Dow Returns

[Robert Sheard is the author of the forthcoming book, The Unemotional Investor, due out from Simon & Schuster on May 12. To pre-order your copy, please visit Amazon.com, where it's available at a discounted price.]

TODAY'S NUMBERS
Stock  Change   Last 
 -------------------- 
 UK   +  13/16  49.94 
 IP   -   3/16  48.00 
 MO   +2  3/16  39.75 
 EK   +   7/16  63.94 
 
 
                    Day   Month    Year 
         FOOL-4   +1.68%  -0.82%   5.92% 
         DJIA     -0.73%   1.04%  12.43% 
         S&P 500  -0.71%  -0.01%  13.52% 
         NASDAQ   +0.46%  -1.56%  15.07% 
  
     Rec'd   #  Security     In At       Now    Change 
  
  12/31/97  291 Union Carb    42.94     49.94    16.30% 
  12/31/97  289 Int'l Pape    43.13     48.00    11.30% 
  12/31/97  206 Eastman Ko    60.56     63.94     5.57% 
  12/31/97  276 Philip Mor    45.25     39.75   -12.15% 
  
  
     Rec'd   #  Security     In At     Value    Change 
  
  12/31/97  291 Union Carb 12494.81  14531.81  $2037.00 
  12/31/97  289 Int'l Pape 12463.13  13872.00  $1408.88 
  12/31/97  206 Eastman Ko 12475.88  13171.13   $695.25 
  12/31/97  276 Philip Mor 12489.00  10971.00 -$1518.00 
  
  
                              CASH    $415.96 
                             TOTAL  $52961.90