<FOOLISH FOUR PORTFOLIO>

Reader Feedback
The Foolish Community Comes Through

by Chris Rugaber
([email protected])

Alexandria, VA (December 10, 1998) -- Now that we're heading towards a real-money portfolio, as announced last week, let me review some of the feedback we received a few weeks ago when I asked for input on how we should make our stock switch this year.

Currently, as most of you know, our Fool Four Portfolio is not real money but instead is a "model portfolio." As a result, we had several questions for our readers, such as: What day should we make our switch into 1999 Foolish Four stocks? What purchase price should we use when doing so -- the closing price the day we "select" our stocks, or the opening price the following day, or something else? I received many responses to my request for input. Thanks again to everyone who contributed -- the Foolish community rules!

Several of you urged us to go with a real-money portfolio, and now that we've done so, questions like the latter one above are pretty much moot. We'll have actual purchase prices, like everyone else.

There was some helpful input that I'd like to share, though. First, thanks to those who pointed out that January 2, 1999, which I mentioned as a possible day for us to make our switch, is a Saturday, which would make a switch somewhat difficult. Fool Tony Luck gets credit for being the first to point out that we were calendar-impaired. For those intending to trade on the first trading day in January, you'll have to wait until the 4th.

Secondly, thanks to those who essentially made the point that the details I was concerned with shouldn't matter that much. As one correspondent advised his fellow Fools: "On New Year's Day, while still suffering mightily from a martini hangover, sort the Dow components according to your favorite strategy. On the next available trading day, place your order� It's supposed to be simple. Let's not obsess." Very true.

The reason for our concern was simply to do right by those who wanted to buy the same stocks as we listed on our site, even though we strongly encourage you to dive into the Foolish Four or the RP4 or whichever strategy you choose when you're ready rather than trying to follow our portfolio. Our calculation and subsequent purchase of Foolish Four stocks shouldn't be like some Academy Awards event, or like Oprah revealing her next book club selection, but rather simply a learning exercise for people to follow at their leisure as they decide whether to use the same strategy in their own lives.

Nevertheless, for those who want to purchase the same Foolish Four stocks as our portfolio so they can, essentially, track their stocks on our site, the issue of price inflation remains. One Fool argued that there will always be money managers who will try to profit off those following the Foolish Four strategy by purchasing the Foolish Four stocks as soon as they are announced, or in after-hours trading, hoping to make a quick buck on a short-term price increase. He noted:

There is no real way to deal these players out the of the game since they are as much a part of the game as any other players. It comes down to the fact that the people reading your column have to make a decision whether to lead the market, lag the market or pay the price to the guys who are deciding to take a shot at the people who follow the Fool4 and like minded strategies.

Good point, whether you agree with his exact scenario or not. There's no way to deal out your fellow Foolish Four investors or anyone else you consider a distraction, either. Keep in mind that the popularity of the approach, as we've discussed before, seems to only have a temporary effect, at most. In fact, one Fool wrote to say that he bought his Foolish Four stocks in mid-January this year and got a lower cost basis than we did!

Generally, more Fools preferred January 4th or later, not December, as the time to make our switch. The new information pointing to late December as the optimal time may have changed their minds, though. Many suggested using the closing prices one day to select our stocks, and then using the opening prices the following day as our "purchase prices." Regardless, now that we've got real money, we'll have real purchase prices, and as Ann Coleman has specified, we'll announce our switch on December 23rd. Do us a favor and don't drive the prices up too much before then!

Fool on...

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Current Dow Order | 1998 Dow Returns

12/10/98 Close
Stock  Change   Last
--------------------
UK   +   5/16  41.81
IP   -1  1/8   41.38
MO   -2  1/8   52.31
EK   -   3/8   72.13

                   Day   Month    Year
        FOOL-4   -1.62%  -4.48%   9.03%
        DJIA     -1.86%  -3.02%  11.80%
        S&P 500  -1.56%   0.12%  20.05%
        NASDAQ   -1.68%   3.41%  28.37%

    Rec'd   #  Security     In At       Now    Change

 12/31/97  206 Eastman Ko    60.56     72.13    19.09%
 12/31/97  276 Philip Mor    45.25     52.31    15.61%
 12/31/97  291 Union Carb    42.94     41.81    -2.62%
 12/31/97  289 Int'l Pape    43.13     41.38    -4.06%


    Rec'd   #  Security     In At     Value    Change

 12/31/97  206 Eastman Ko 12475.88  14857.75  $2381.88
 12/31/97  276 Philip Mor 12489.00  14438.25  $1949.25
 12/31/97  291 Union Carb 12494.81  12167.44  -$327.38
 12/31/97  289 Int'l Pape 12463.13  11957.38  -$505.75


               Dividends Paid YTD  $1092.81
                            TOTAL  $54513.62

</FOOLISH FOUR PORTFOLIO>