Being a product of the ’80’s, I always love to quote Gordon Gecko, Michael Douglas’s character in the 1987 movie “Wall Street”. If you are a fan, you will remember Gecko addresses the stockholders of a company he has targeted for a hostile take over and begins his speech with the words “greed is good”. Douglas’s character goes on to tell the outraged stockholders that greed quantifies and cuts through to the basic needs of the business person…make as much money as possible at any cost.
As I get older, I put less credence in the quote but believe it does have an important role in dealing with the stock market. You are in the market because you believe it will return a better profit than a bank or government issued investment product. Also, you realize you are contributing to capitalism by investing in the companies that fuel the economy. Or at least, I hope that is why you are in it. The point being greed got you there and that is where the extent of your greed should end. Once in the market, moderation and patience are key. One must keep perspective and realize there are no “get rich quick” components to the market for average people. Greed would be going for the quick kill on some speculative issue and that’s where you get killed.
I had a great aunt who worked three jobs from the time she was in her early twenties until retirement so she could fund her jones for the market. She made a fortune. All on very un-sexy market issues. She never let greed fuel her desire. My great aunt loved our country and thought she was a part of building it. And she was, Coke, Exxon, Mary Kay cosmetics…etc. The building blocks of our economy. Was she in fact greedy? Probably. But, healthily so and that is a lesson I believe is germane to all our lives. Her philosophy was to seek out companies that already were or were soon to be, household names. Her investment strategy was simple; management had to have a significant stake in the company, the company MUST deliver a dividend even if it was tiny and, they had to be harbingers of goodwill towards the community. I once gave her a hot tip on a sure fire money maker…Cisco the computer company. This was in the mid-90’s and Cisco was hot at the moment. I was her favorite nephew so she took my advice and put a ton of dough on it. Six months later the stock tanked. Sheepishly, I called up my great aunt and apologized for my impulsiveness and regret in dragging her into the ill fated stock. Very surprised, she told me she had no idea what I was talking about she had made a small fortune on the stock. I was very perplexed and thought maybe my great aunt was finally going batty. I began asking her questions on how she could have possibly made anything. The explanation was simple, although she trusted me implicitly my great aunt had done her own research. She told me she knew the company had to be good because she saw their trucks on the road and they were always so clean and the drivers were always dressed so well and she had read about how the company were great corporate citizens and on and on. I told her Cisco doesn’t have trucks and what was she talking about. As it turns out she had bought SYSCO the food company not Cisco the computer people!
The lesson is a good one. Be greedy enough to get into the market but, ease up and be rationale once you are there. Slow and steady will always beat out impatience and impulsiveness.