A Comfort Zone

When it comes to stocks, I'm somewhere between plain vanilla and downright boring. I'm more tortoise than hare. NAIC's philosophy is to "get rich slowly." Patience is your friend as long as you're willing to move quickly when opportunity arises or when a mistake needs to be corrected.

I've had more success with individual stocks than mutual funds, so I won't be recommending mutual funds here. I don't buy on margin. I don't short stocks or recommend short sales. I'd rather focus on the positive and find good stocks to buy. When it's time to sell a stock, I'll say why and then move on. I don't use hedge strategies, hedge funds or sector funds. All these tools have a place in the investment world, but I prefer plain stocks.

I rarely invest in technology stocks, although one could argue that Diebold and Emerson Electric are tech stocks. I avoid the high-flying stocks like Yahoo (in the late 1990s) or Google (now). I like Google. I'm using it to write this blog! When Peter Lynch managed the Fidelity Magellan fund, he said he liked to buy stocks that use technology (like grocery stores using scanning devices) rather than buying companies that develop or manufacture technology. I agree, but mainly because technology isn't something I understand and it changes faster than I can keep pace. I enjoy using technology but I'll let others invest there. Lynch said if you cannot explain a company in a sentence or two, don't buy it. Invest in what you understand.

I've bought bonds in the past, but not with much success. A Royce convertible bond once netted me some shares of Royce Value Trust, which was a good thing. I enjoyed reading Chuck Royce's commentary on the market in his quarterly reports. I prefer utility stocks and real estate investment trusts as alternatives to bonds.

A good portion of our retirement income is in defined-benefit pension annuities, which I consider fixed-income. So, to achieve balance, the part of our retirement income that I shepherd is in equities. Everyone has to find a comfort zone and mine is the equity market.

The stock market is a fearful, unknown place for some. It's misunderstood by many. Some see it as a way to gamble, enjoying the thrill of "playing" the market. When some friends and I organized an investment club in 1982, one of our original members kept wanting us to buy some "hot tip" stocks so we could make a quick profit. He couldn't buy into the "get rich slowly" motif, so he left the club after a few months of mutual frustration.

The stock market has been home for me since 1982. There have been some roller-coaster rides, such as 1987, 2000, and 2008-2009. There have been numerous surprises but not too many mysteries. If you can develop a sense of fair value for a stock and stay focused on your goals, you can keep your head while others are irrationally exuberant or dejectedly pessimistic. Then, the stock market can begin to feel like home.