Invest … Reading Is Fundamental

“Investment in knowledge pays the best interest.” — Abraham Lincoln

This weekly message was first posted during November 2012, rekindled as a reminder that “Reading Is Fundamental.”

Reading is Fundamental

This Thanksgiving season, I was intrigued by a few conversations that covered the complete spectrum of the investing experience.

One discussion revolved around getting started. The individual happens to be stationed in Afghanistan with some time on his hands and is wrestling with where to start. I believe I convinced him that he was already ahead of the challenge. Why? Because he’d already begun imitating a sponge — absorbing everything that he could get his hands/eyes on. Read. Rinse. Repeat.

I still believe is a valuable resource for getting started and referred him to their broker smorgasbord and commentary on how to choose one.

The second discussion involved someone very close to me who is now actively funding a 403(b) and is giddy about the potential. We look forward to watching the account balance grow in much the same way that Tin Cup (our retirement plan model portfolio) continues to entertain us.

The third is actually a blend of a couple of separate conversations. One long-time subscriber called me to let me know that she’d no longer be subscribing. She’s 80 years old, for one thing. But she wished us well … a joyous holiday season … and then gave us an early Christmas present. “God bless you and your family and all of the Manifest Investing staff and community. It’s not that I’m not investing anymore — but I have reached ‘critical mass’ and I really want to thank you. I have a collection of high-quality stocks at Fidelity and Ameritrade … but I’ve reached the point where you’ve taught me how to watch them — and even more importantly, because of what I’ve learned, I have no trouble sleeping at night. In fact, I’ve slept well for a long time. Thank you.”

No. Thank you.

We’re humbled and grateful.

My wife and I and my parents went to see Lincoln this weekend. (1) Daniel Day-Lewis clearly knocks it out of the park and will be nominated for an Oscar, and is a likely winner. (2) If you’re going to see the movie, I’d recommend googling or spending a few moments with Wikipedia and the setting, characters and situation surrounding the passage of the 13th amendment. Tommy Lee Jones as Thaddeus Stevens is also worth the price of admission and a true courageous pioneer. (3) If you believe that bipartisan rancor and disagreement is something new on Capitol Hill, you’re wrong. Go see the movie.

Read. Rinse. Repeat.

Lincoln was voracious reader. There’s also a poignant scene in the movie where Lincoln urges simplicity while pondering a major decision. He shares “Occam’s Razor according to Euclid” with a youthful engineer and the telegraph operator, a powerful reminder that sometimes the best solutions are the glaringly simple.

And from a couple of young people getting started to a group of experienced long-term investing advocates who sleep pretty well at night, we’re grateful for the reminder.

And the optimism about what the future holds.

“I am a firm believer in the people. If given the truth, they can be depended on to meet any national crisis. The great point is to bring them the real facts — and some beer.” — Abraham Lincoln

Listen For The Cadence

by Mark Robertson, Senior Contributing Editor, Better Investing

We Are NOT Afraid … To Be Millionaires!

“Youth! There is nothing like youth. The middle-aged are mortgaged to Life. Youth is the Lord of Life. Youth has a kingdom waiting for it. Every one is born a king, and most people die in exile.” — Oscar Wilde (1854-1900)

I thought I understood [investment clubs and long-term] investing.

After all, I’ve been doing this for nearly 10 years, have completed thousands of Stock Selection Guides (Stock Studies) and belong to a few investment clubs.

Kelvin Boston, in his remarks presented at Congress 2001, urged NAIC to realize that we have a responsibility to remind people that they need not be afraid to be millionaires. No fear. Thirty bright-eyed youngsters changed my outlook.

Captured by a Captive Audience

My audience ranged in age from 9 to 16. A group of seven boys and girls near the front row belong to the [Ujamaa] investment club. It was early on a Saturday morning.

Clearly, some of their friends were doing something else in places some of these kids wished they’d rather be. Others weren’t sure. “Who’s here because they want to be here?” A few arms bent at the elbow and hands were raised at half-mast. All of the investment club members raised their hands, perhaps a little higher than their cohorts. “OK. Who’s here because some adult has forced you to be here?” Another 10 hands go up. All the way up, with feeling. Beads of sweat formed on the back of my neck. I took a deep breath. I reminded myself that they can smell fear. It didn’t help.

“Wow. Who believes that no matter what I do or say that you’re going to be bored out of your skull and that you’ve already wasted a beautiful Saturday?” Three girls at the back, on the far right, nearly stood up.

I didn’t have a chance. Or did I? As the sweat found it’s way to my forehead, these three girls volunteered to become my teammates in a stock-picking game.

Of Movies, Camaros and Hawaii

I tried to remember what $20 a month was like when I was 9 years old. I had a paper route and did some odd jobs. In hindsight, it seems like a mountain of cash. One of the three grumbling girls reminded me that they spend $10 a week to go to a movie nearly every weekend — and that doesn’t cover the popcorn. A young man in the front row talked of how $20 a month now might grow to fund a car payment by the time he’s 16.

No fear. They are clearly NOT afraid.

The beads disappeared. I smiled. How do we know it’s possible? I shared the story of our incomparable chairman, Tom O’Hara, and $20 a month since 1948. We know it’s possible to achieve an annualized rate of return of 13.2% over 50 or 60 years. He’s done it. And he openly admits that other NAIC investors have done even better.

We divided into three stock-picking teams: the Good, the Bad and the Ugly. The three grumbling girls and I became the “Uglies.” A list of long-term companies from Fortune was provided to the teams. We discussed the companies and the youngsters tried to pick the long-term leaders.

My Teacher’s Guide had the 40-year rates of return. The accompanying chart illustrates the selections and the results of investing $20 a month at these rates of return.

The three grumbling girls picked all the stocks. Kudos to the Chicago South volunteers, these youngsters and their parents. Invest regularly. No fear. Listen for the cadence and march to the drumbeat of regular monthly investing.

This column originally appeared in Better Investing, July 2002. The theme is timeless and ever important …