Re: Asset Allocation , part 3: it's a TIME thing

From: Randy Barnes <rbarnes@mindspring.com>
Subject: Re: Asset Allocation , part 3: it's a TIME thing
Date: Sat, 15 Aug 1998 22:02:26 -0400

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> While I agree with your basic premise that non index mutual funds are
> generally poor investments, I disagree with your premise that "the average
> investor can beat the market" 

First you say the average person cannot beat the market, then you say
you do. Are you not average? ;-)

You can beat the market by investing in a handfull of the top companies
that will still be around 10 years from now. Avoid companies that the
average person has never heard of. The names in our account include
Dell, AOL, Home Depot, Safeway etc.. Buy big companies that are really
live and kicking.  


> If capital markets operate in this fashion, what do you do?  Low cost mutual
> funds are one alternative, and the other is to construct a well diversified
> portfolio of individual stocks, and hold them for ever, which is my
> strategy.  I never look at annual reports, investment news letters, etc.
> Rather than wasting hours analyzing knee deep out dated investment crap,  I
> enjoy life.  My returns have been better that the market, because I
> generally chose blue chip stocks, not because I "time" the market, or know
> how to pick winners.  I buy stocks when I have money and would only sell
> stocks if I needed money.  If I spend an hour a month thinking about my
> investments, that would be an unusual event.

 [snip]
> Steven M. Foulks, CPA, CFP, PhD
> <http://www-instruct.nmu.edu/business/sfoulks/>
> 
> Northern Michigan University <http://www.nmu.edu/home.shtml>
> 

Really, I am pleased that someone gets it.  Your point about hold
forever is the key. Your strategy IS THE strategy for beating the
market.  The average person CAN do this. This is not as risky over a 10
year time frame as owning a bunch of stock funds.  The efficient market
will make your little account of top companies outperform the overall
market by some amount, which will translate into a more comfortable stay
in the nursing home. Marketing and management costs will not be a drag
on an account like this.   

Another way to beat the market is follow a simple strategy, and let your
portfolio autopilot for a long time period. My favorite is what I call
the Fab 4, actually a version of the Foolish four, called "RP", whatever
this means. Currently the 4 stocks are IP, GM, CAT, CHV. This is the
surest, safest, easiest way to a million that I've ever seen. Check the
numbers on this. The last 37 years are proof enough for me. 

http://www.fool.com/DDow/1998/DDow980213.htm

Thanks again for your insight and extremely valuable information.  I
hope that a few lurkers on this list see the light and realize just how
easy building wealth really is. Buy the market in the S&P index, or just
a small group of the best BIG companies, and let time do it's thing.  

- - Randy Barnes,
Regular Guy

PS, If you think you not average enough to beat the market then ride
over to the library and read  What Works on Wall Street, by James
O'Shaughnessy. His new one (title unknown)is a top seller right now and
is probably a good choice too. Having read/skimmed this you'll be far
above average and have better knowledge than anyone that ever attempts
to "sell" you investments.



- -

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