Posted on: Thursday, January 1, 2004
Vow to take safer approach with investing this year
By Warren Boroson
(Morris County, N.J.) Daily Record
Here are some New Year's resolutions you might consider:
• Ask yourself, if you had only one year to live, what would you regret never having done? And consider doing some of those things next year.
• Have a trusted outside authority review your investment portfolio.
• Shorten the maturity dates of your bonds. (If interest rates go up fast, as they may, the value of your bonds will go down fast.)
• Consider never again investing in individual stocks, and investing instead in no-load mutual funds.
• (Forgetting the above) Consider buying stocks of prosperous companies that pay generous dividends (because of the lower tax on dividends now). One possibility: GlaxoSmithKline ADR, the drug company, yielding 2.8 percent and top-rated by Value Line for timeliness and relative safety (ADR, American Depository Receipt, means it's a foreign stock).
• Separate your investing into (a) the frivolous and (b) the serious. Make the percentages about 1 percent and 99 percent.
• Never forget Benjamin Graham's two rules of investing:
1. Don't lose money.
• Don't forget Ben Graham's profound observation: "The future is uncertain." (The expression "sure thing" is an oxymoron.)
• Once you reach the age of 50 or 60, don't take risks that might lead to big financial losses.
• Same goes for when you reach the age of 30 or 40.
• Remember: The stock market can go way down and stay down for many, many years. In 1964, the Dow Jones Industrial Average closed the year at 874.13. In 1981, the Dow closed the year at 875 (okay, dividends were far higher then).
• Remember: The stock market will always do whatever makes the greatest number of people look like jerks.
• If you're not sure what to do with a losing security, sell it.
• If you're toying with the idea of selling a winner, sell only half.
• Yes, you should market-time — to a small extent — when things are clearly way out of whack. Anyone who didn't lighten up on stocks before the great crash of 1987 was foolish.
• Buy some foreign stock funds if you need more exposure abroad. Some good ones: Tweedy, Browne Global Value and Julius Baer International.
2. Don't forget the first rule.
