w w w . t i c o n l i n e . c o m

INVESTOR OXYMORON

It is hard to image many individuals as 'investors' these days. With the rampant trading in and out of stocks, the term seems to be as meaningful as calling a hooker romantic.

Why do people trade in and out so frequently? Well, the answer can be attributed to a number of reasons, the main 3 being:

1. Greed
2. The ease of which stocks can be bought and sold
3. Wild fluctuations in stock price (not to be confused with value)

"Price is what you pay. Value is what you get."
- Warren Buffett

"Risk comes from not knowing what you're doing."
- Warren Buffett

If individuals were actually interested in making money, they would examine the methods used by individuals who have achieved wealth before them. Although full understanding may never be achieved, it will still significantly increase an individual's prospects for creating wealth.

In our society, rampant trading in the stock market can be attributed to our difficulty in understanding the concept of equity. Many people do not understand the meaning of equity unless it manifests itself in a physical object. Examples include a house or a car. Do we look at house and used car prices constantly to see if we should sell them? I should think not (although if it was easy and quick to jump from house to house or car to car, I'm positive that many investors would do so).

A stock, which is simply a ticker symbol to most individuals, appears to float in limbo, the equity it represents lost in haze of betas, employment numbers, interest rates and stock prices.

I believe that if buying part ownership in a company were difficult and time consuming, investors would approach the idea of stock investing with more caution and sense. Another idea that would curb frantic buying and selling would be a limit to the number of stocks an individual was allowed to buy over his lifetime. This was what Warren Buffett had in mind when he made the comment that individuals should be given at punch card with 20 slots. His idea was that when a person buys a stock a slot would be punched out. Once all 20 slots were punched out the investor would be done investing for the remainder of his life.

It is often difficult to feel sorry for market timers when they lose their shirts. Many of them ramble on about their investing prowess during bull markets and always have opinions on every stock traded on the S&P. One is often compelled to leave them alone as they bid up the price on every dud in the market.

"The stock market is filled with individuals who know the price of everything and the value of nothing."
- Philip Fisher

Instead of having trying to form an opinion all industries, Buffett believes that it would be more profitable to become extremely well versed in one or two businesses. Indeed, the long-term method of investing is the perfect example of the old "keep it simple stupid" clichée.

To end this article on a light-hearted note, here is my top 10 list to see if you are not an investor:

10. You get excited when you hear about a 2 for 1 split.
9. Press releases get you more excited than annual reports.
8. You break out into a cold sweat when you can't check stock prices.
7. You buy a stock because somebody else tells you to.
6. Dips in the stock market send you into severe depression.
5. Bull markets signal your return to stocks.
4. Your reason for buying is 'It's at it's 52-week low!'
3. You have more stocks in your portfolio than your mutual fund manager.
2. You think P/E is a subsidiary of GE.

And the number 1 test to see if you are the not an investor...

1. Warren Buffett calls you Mr. Market

Cheers,
Jim Chuong