In Search of the Perfect Investment

Wonderful Mother’s Day weekend. Susan and I went to see Claire, Ted, Sophie, Georgia and Mark in Boston.

Daughter Claire and granddaughter Sophie:

We spent an afternoon at Harvard’s Museum of Natural History. I could have spent a week in this absolutely engrossing museum:

Sophie checking out the animals at the magnificent Museum:

From the Museum. The Silk Road:

And how the Chinese protected their silk secrets:

Pushback on syndications and stockmarket negativity. ” Criticisms I’ve heard recently:

“You’re being too negative on the stockmarket.”

“You’re being too short-term.”

“You’re trying to time the market.”

In my defense, I read a lot and post the more interesting stuff. I don’t always believe the stuff I read. For example, I find “The End of the World” musings to be fascinating. That stuff says the next financial crisis will arrive because we as consumers specifically and the country in general can’t keep piling up debt on top of debt on top of debt. There are also “The Timers,” who believe in cycles. Our last downturn was 2008. That was eight years ago. We’re due for another downturn. And what’s happening today in the markets may simply be the engine revving up to go down.

None of these End of World or Timers pundits have a solution. So let me suggest Harry’s Investment Rules to Live By:

 1. No debt. When you or your investments have debt, the lender can take them away from you — especially at the worst time when things go awry, at their least valuable. When your loses will be maximum. Debt is dumb.

2. Diversify. You can’t predict anything. So, spread your money over things that you predict will do best. (How about that conundrum?)

3. Participate in many things. Luck plays a huge role. But you can’t be lucky unless you’re in.

4. Keep cash on hand for the next rainy days. Most people like to keep two years of spending in cash. I know someone who’s got six years in cash.

5. Don’t watch it every day. That’s entrance fee into the loony bin. Do not pass Go. Do not collect $200. Go straight to the nut house.

6. If your stocks are dropping, you need to figure: Have their prospects changed and should I sell them? Have their prospects not changed, should I buy more? There is a good case for buying when blood is flowing in the streets. I have had an “inviolate” 8% stop loss rule. I’m beginning to think it shouldn’t be so inviolate.

7. Dollar cost averaging is a good plan — when you’re young. And now index funds are so cheap, and getting cheaper. Look at what Fidelity is doing to Vanguard:

Today’s BusinessInsider quotes Andrew Tobias on investing. Here’s are his Ten Rules.

1. Only invest money you won’t need for a long time

Little, if anything, is guaranteed when it comes to investing.

You could earn money or lose it, so if you’ll need quick access to liquid cash in the short term, you probably won’t want to invest.

“Only invest money you won’t have to touch for many years,” Tobias emphasizes. “If you don’t have money like that, don’t buy stocks. People who buy stocks when they get bonuses and sell them when the roof starts to leak are entrusting their investment decisions to their roofs.”

2. Don’t time your investments

People have a tendency to “shun the market when it’s getting drubbed and venture back only after it has recovered,” Tobias explains.

However, “It is precisely when the market looks worst that the opportunities are best; precisely when things are good again that the opportunities are slimmest and the risks greatest.”

In short: Don’t get overly excited when the market is judged to be healthy, and remember that bad things aren’t obvious when times are good. As legendary investor Warren Buffett likes to say, “You only find out who is swimming naked when the tide goes out.”

3. Invest periodically – not all at once

Rather than rushing to buy hundreds of shares when you’re convinced the stock is going to take off, invest a portion of your paycheck in the market each month, Tobias recommends.

“Diversify over time by not investing all at once,” he says. “Spread your investments out to smooth the peaks and valleys of the market. A lifetime of periodic investments – adding to your investment fund $100 a month or $750 a month or whatever you can comfortably afford – is the ticket to financial security.”

4. Think long-term and leave your investments alone

“By and large, for your long-term money, ‘buy and hold’ is the way to go,'” Tobias emphasizes.

As Warren Buffett says, “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.”

Forever is a good holding period. After all, Buffett has held his stock in GEICO since the 1950s, Tobias notes.

5. Diversify

Putting all of your money in one place is asking for trouble. “If all your money is riding on two or three stocks, you are exposed to far more risk than if you’ve diversified over 20 or 30,” Tobias writes.

Think about it: 20 or 30 companies simultaneously failing is pretty unlikely.

He also points out much of the market’s gain has come from a small number of “big winners,” such as Microsoft and Intel: “So you could attempt to find these stocks to the exclusion of the rest of the market … but probably miss them. Or you could be content to buy very broad index funds that, while they’ll perform only ‘average,’ will almost surely include these great stocks in their average.”

6. Ignore the noise

Investing gets emotional. Oftentimes, our choices are clouded by fear, greed, and nervousness – and it doesn’t help that you can see how you’re doing throughout the day.

Avoid the temptation to check a stock ticker or your account on a daily or weekly basis. Markets go up and down every day, and so do individual stocks, “but that doesn’t mean there is significance to every move,” Tobias warns.

Plus, the more you trade, the more you underperform, Buffett says: “For investors as a whole, returns decrease as motion increases.”

7. Don’t fall for the stocks that ‘everyone’ likes

“Beware high-fliers and the stocks that ‘everyone’ likes, even though they may be the stocks of outstanding companies,” Tobias warns. “Even if the growth comes in on schedule, the stocks may not go up. They’re already up. Should earnings not continue to grow as expected, such stocks can collapse, even though the underlying company may remain sound.”

Plus, it’s unlikely that these stocks have been ignored and are “hidden gems” Wall Street has failed to discover, he notes.

8. Don’t bother subscribing to investor newsletters

“The more-expensive investor newsletters and computer services only make sense for investors with lots of money – if then,” Tobias says. “Besides their cost, there is the problem that they are liable to tempt you into buying, and scare you into selling, much too often.”

Plus, “Half the experts, at any given time, are likely to be wrong,” he says.

There are plenty of free, online resources that you’re better off tapping into. Tobias recommends Yahoo Finance to learn more about publicly traded companies (you can look at annual reports, charts of performance, and earnings estimates) and Morningstar to learn about mutual funds and investing in general.

9 Invest – don’t speculate

“It’s one thing to take risks in low-priced stocks you hope, over time, may solve their problems and quintuple in value. … But it’s quite another thing to jump in and out of stocks (or options or futures) hoping to ‘play the market’ successfully,” Tobias writes.

Keep it simple, he emphasizes: “Buy value and hold it. Don’t switch in and out. Don’t try to outsmart the market.”

10. Embrace index funds

“The bottom line is that most people should do their stock-market investing through no-load index funds – mutual funds that don’t attempt to actively pick the best stocks, but just passively invest in all the stocks in the index they are designed to match,” Tobias writes.

You won’t be hitting any grand slams by investing in low-cost index funds, but you also won’t lose money rapidly or dramatically.

Plus, Warren Buffett, his right-hand man Charlie Munger, and Vanguard founder John C. Bogle are all big advocates of the index fund.

Construction tip:
Cordek sheet is fantastic. Lay it down during construction and it protects your floors, banisters, furniture. It’s waterproof. It has “give.” You can drop heavy stuff on it (like tools) and it won’t damage your floor. Cordek is magic. I think 3M may have invented it.

Geriatric Musings

+ My goal for 2016 was to lose 10 pounds. Only 15 to go.

+ How to prepare Tofu:

1. Throw it in the trash.
2. Grill some Meat.

+ A recent study has found that women who carry a little extra weight live longer than men who mention it.

+ I love being over 70. I learn something new every day…….and forget five others.

+ A thief broke into my house last night. He started searching for money. So I woke up and searched with him.

+ Sunday, March 13, 2016 began Daylight Savings Time. Don’t forget to also set your bathroom scale back 10 pounds.

Harry Newton, who got no exercise all the weekend and now feels like someone inserted cement into his joints He’s going to bike and play tennis aggressively today.