Like Going One-on-One with LeBron James

Buy now? Sell now? What do you do when the stock market is like a roller coaster ride?

The motto at the Kiplinger Editors, where I was a writer for 16 years, was “Buy good stocks and hold on to them.” I try to go along with that despite temptations to jump into the latest trend or dump everything when the market is shaky. Of course, the trick is finding out which stocks are good.

I’ve seen friends become day traders, sitting at a computer buying and selling stocks, thinking they can outsmart the market by following their latest whim. “Microsoft is hot. Think I’ll get in.” Or:  “I have a hunch that Toys.com will make it big.” If the stock has become popular, you are already too late. Many day traders were wiped out.

The trouble is, you are betting against people who have done real research: the experts at mutual funds or hedge funds who can really crunch numbers and even visit the companies they invest in. Why do you think you are wiser than them? Would you go one-on-one with LeBron James in basketball?

I remember buying stock in Mortgage Investors of Washington in 1971, thinking that Washington, D.C. real estate would take off. Well, that was right, but the company was poorly managed and tanked. My $15 per share investment turned into $3.50. I also thought “Annie” would be a big hit musical movie and placed my money on Columbia Pictures. I was right about the movie too, but the stock didn’t follow it.

So since then, I have put money into mutual funds or other instruments invested by others. I don’t know what they bought—don’t want to know. Usually, they are hedged enough with bonds or other instruments, where I don’t suffer big losses in a market downturn or leave me euphoric in a boom. At this stage of life, I am not trying to suddenly get rich.

My broker once had me invested in the stocks in the Dow-Jones Average of 30 of the biggest companies.  I got uncomfortable. “Conrail? ? General Motors? I don’t want those dinosaurs. Get me some new companies.” But many new companies don’t survive.

My broker tried to talk me out of dropping this investment, but it didn’t work.  I saved his note for some odd reason. What a mistake! The Dow has risen 2,500% in that time.

If I had it to do over, I would have put money in a fund that followed the Dow-Jones averages, or another that rides with the market.  Would I do that today? Well, no, at this stage in life I can’t risk the volatility.