“I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.”
Warren Buffett – Founder and CEO of Berkshire Hathaway
“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.”
Paul Samuelson – Nobel Prize Winner, Chair of the Presidents Council of Economic Advisors, World Renowned Economist
“If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.”
John Bogle – founder and former CEO of The Vanguard Group
“Rule #1: Never lose money; Rule #2: Don’t forget rule #1.”
Warren Buffett
“Don’t gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don’t go up, don’t buy it.”
Will Rogers – Early 20th Century Humorist and Wise Sage
Have you been paying any attention to what has been happening on Wall Street the last few days? Whew!!!!! We are not rich people with a lot of investments but we have SOME but after the last few days we have quite a bit less. The main factor that seems to be scaring investors is what the World Health Organization calls COVID-19 or what most of us the “Corona Virus”. Whatever you call it, it certainly is causing an uproar. It all started in China but it categorically is going to cause disruption to the world economy and to our national economy. It is another demonstration of how interwoven the world economy is these days – for better or for worse. I have read other commentaries that say that COVID-19 is not the only reason for the downturn. They cite the recent surge in stock prices as perhaps overvaluing many of the shares being traded and uncertainty over the upcoming election. These commentator/economists would say that we are due for a market correction at some point anyway. As always one can find a commentator that says exactly what we want to hear and one that says exactly what we DON’T want to hear.
I think it is fair to say that I know nothing or next to nothing about investing. Of course, you can always Google it and find out all kinds of stuff – like all the helpful quotes that start this column. Seriously though, if you are interested you may want to check out a blog written by one of our very best friends, Jeff Johnson, called Cornerstone Investments – https://cornerstoneinvestmentsllc.com . Jeff has been involved in investments for his whole career and he is one of the smartest guys I know. But even more than that he is somebody with the highest integrity and principals. I would trust him with my life. If you wanted some real, informed, meaningful commentary instead of this silly story you might want to check that out.
So, what SHOULD somebody like us who has just a few dollars to invest, do in these times? How do you decide? Many years ago, Janice and I owned some stock in the small company that I worked for. I should add that this was a WONDERFUL company that was very successful. Because I left their employment, I could no longer be a shareholder and we sold our shares which had experienced a significant gain in value. We consulted with our advisor as to what to do with this little windfall. He reminded us that at our young age it made no sense to do anything but to invest this in the same manner that we were investing ALL our retirement savings – in the stock market. If memory serves me correctly, the Dow Jones Industrial Average (DJIA) was about 11000 at the time. AND as fate would have it, this was the beginning of the stock market crash of 2002.
In those days we relied on printed monthly statements to tell us how things were going with our little nest egg. It seemed that every month was worse than the one we just went through. Janice began hiding the monthly reports from me. The DJIA went down to under 7000. I remember sitting down with her late one night after the kids went to bed and talking about what to do. We so feared that our little savings would be gone and that we would never be able to get our kids through college and or to retire. We considered selling all the stock and putting the money in a FDIC guaranteed bank account. At least we would be able to keep a little of what we had saved.
Well, we both needed to get to bed, because we both had to be at work early the next morning. And after the busy workday that followed and getting the kids to the umpteen places they needed to go, we really didn’t have a chance to talk about that anymore. And so the days went on. Thus, we made a non-decision by default to stay the course. I wish I could say that we were that smart or confident, we weren’t – we were just busy. The rest is history, until the recent debacle, the DJIA was over 28000.
In the early 1990’s Janice’s workplace went through an ownership change. As part of the transition the employees were given the options to keep their saved retirement dollars in a defined benefits pension fund or to move them out to a 401K or a personal individual retirement account (IRA). Janice didn’t feel that she really understood all the ramifications of the options. If we had been married, I would have strongly advocated that she move those funds into a stock-oriented IRA. This was the 90’s, people were making money hand-over-fist. Why limp along with some staid-old-duffer-managed pension fund when you could get out and REALLY make money?!?! Fortunately, I wasn’t there to influence her and she made the default non-decision to stay in the pension fund. Janice has been retired for several years while her peers who withdrew their savings are still working. NOBODY has access to a defined benefits retirement plan anymore but she does.
This is usual point in my little ramblings when my readers ask the obvious – so what is your point? I think it is something like this: We tried to be careful in our financial dealings. We tried to save and not live beyond our means. We tried to do the right things. But in the end, its better to be lucky than trying to be smart!! Our good fortune was not a product of our wisdom. We had a discussion the other night – maybe we need to sell anything that we have in the stock market. But we were so busy again today………………….