The goals behind Foolish Four investing include a market-beating return, but also the ability to invest in today's stock market while still making time for work, family, and other pursuits. A recent Washington Post article describes an opposite approach: investing as an all-consuming passion.
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While the Foolish Four's and Cramer's approaches to investing are not really comparable -- since as a hedge fund manager Cramer is responsible for millions of dollars of other people's money -- the Post article nevertheless provides a counterpoint to mechanical approaches such as the Foolish Four.
As most of you know, there are several goals behind the Foolish Four. Of course, the most important is to beat the market, which we have had mixed success at doing so far. This year, we are ahead of the Dow as of Friday, which investors should remember is the index the Foolish Four originally was set up to beat (as noted in the title of Michael O'Higgins' book, Beating the Dow). Of course, we also want to beat the S&P 500, which we are currently trailing by about 3.6 percentage points (as of Friday's close).
However, a second key goal of the Foolish Four, and indeed of all Foolish investing, is to invest successfully without letting it dominate your life. Whether you have a consuming job or a demanding family, or both, one important concept behind the Foolish Four is that following it does not crowd out the other things you want or need to do every day.
Meanwhile, the Post describes some of the aspects of Cramer's trading life: at the office by 5 a.m., monitoring several computer terminals and CNBC, all while trading thousands of shares of stock. The article includes a short account of Cramer's activities one day last February, and notes that he lost more than $400,000 before lunch. Of course, Cramer has an excellent record over the 14 years that he has managed his fund, and the $400,000 is probably just a drop in the bucket of what he buys and sells every week.
Perhaps for that reason, some investors might find Cramer's activities exciting. After all, there's lots of activity, lots of money to be made, and a clear score at the end of each day. Indeed, if you're still trying to figure out your investing style, I recommend the article for that reason alone: How you react to it may tell you quite a bit about where you are on the investing spectrum. If you find the description of Cramer's days enticing, then frenetic trading may just be for you (but please, consider going to Wall Street and doing it with other peoples' money). However, if you're like me, you won't find it an attractive alternative to the Foolish Four and other mechanical investing approaches.
Related Link:
Risky Business, The Washington Post Magazine, 8/27/00