When I was 8 years old, my family owned a shore house on Barnegat Bay in Brick NJ. My dad was a tough and frugal taskmaster. Rather than pay someone to paint our house, he made it a family project paying each of us a small hourly wage to paint our barn red cedar shingle house over the course of a few weeks. I made $135, which was a princely sum for an 8 year old in 1968. I also had another $75 I had saved up from other smaller projects and gifts.
My grandfather and my dad both fancied themselves as smart and disciplined investors in the stock market. We always had Forbes and the Wall Street Journal delivered in the house and since I was a voracious reader – I was constantly reading them. The world of investing was intriguing to me. The fall following our painting project, I spoke to my dad and we discussed what I could do with my new fortune. After years of listening to my dad and uncle discuss investing, I wanted to invest in the stock of a company.
I picked Chrysler and Bethlehem Steel. My memory has Chrysler going from $35 to $74 and Bethlehem Steel going from $28 to $35. What a hefty gain I made on my initial investment! I suggested to my dad that I sell the shares while they were high. My dad was a buy and hold guy and I am sure he was thinking I would go and fritter away my gains if I had the cash in my hot little hands. He talked me into holding on to the shares. Well – what a lesson I learned! Chrysler eventually went down to $28 where I sold it at a loss and Bethlehem went to $21, which I sold at a loss as well. Of course – good thing I didn’t hold on to try and make back my loss – since both companies ended up declaring bankruptcy some time later!
My first foray into investing was a valuable, yet not very profitable, lesson for me.
What I learned back then as an 8 year old, and I apply to my investing strategy with my clients today is: buy and hold, as an investment strategy, is inexpensive but very limited; objective and non-emotional decision-making is critical to successful investing.