Wednesday, September 23, 2009

Invest like it's 1966

I'm currently reading F Wall Street by Joe Ponzio. I high recommend this book, especially to those who are interested in learning more about value investing. The book is dedicated to teaching readers to value the underlying business that a stock represents.

I just finished a chapter called "Invest Like It's 1966." The chapter focuses on the story of Rose, a client of Mr. Ponzio's who became widowed in 1966 and had to feed herself and put her son through medical school. She started with a $10,000 insurance check. She lived on the income from her investments, but was still able to amass a portfolio worth $1.5 million by 2008. How did she do it? Well, she had help from her brother who ran his own business. No doubt, his guidance on which stocks to buy and what prices to pay was helpful. In fact, she claims that she didn't know very much about investing. I think that it was her ignorance that was her saving grace.

Rose didn't have the Internet when she started investing. She got her prices from the newspaper the next day. She wasn't bombarded with a lot of information and noise about the stock market. There was no CNBC or Bloomberg. Instead, she focused on what was most important: safety and buying great businesses at good prices.

This is one aspect of investing with which I struggle. I don't ignore the noise as much as I should. In fact, I probably generate noise with this blog. I'm going to commit myself to paying less attention to the financial media. I think that it'll be good for my mind and my portfolio.

1 comment:

Anonymous said...

It may be ironic, but it's not always about buying "great businesses" at great prices, you can make a killing even with a piece of crap stock as long as you time it right.

For example, look at a stock like ALRT. I was drawn to it after seeing it dip as low as $0.02 when it had been for years monkeying in the $0.03-$0.20 range with basically no dilution.

However, after looking at its pathetic fundamentals and their shitty product I doubted and sold it at $0.025, a mere $50 gain which I've already lost (and more) in commissions and mistakes.
Should I have been a month more patient, I'd have bought a TEN BAGGER stock.