April 4, 2001 To the Kids. Subject: Your financial future - the portfolio I’m managing for you. This is a follow-up to my letters of a few years ago. It is to let you know that I’ve been busy with my task (given to me by your Grandfather). I’ve attempted to buy companies that fall into only a few categories. The perennial top performers, and promising turnaround prospects. Stocks that you accumulate slowly at depressed prices now that have the prospect of turning around after several years. Stocks that generally follow some basic rules. A major player in a basic industry with a history of success. A multi-national corporation with a low P/E (Price / Earnings) ratio, usually a strong dividend record, substantial insider holdings, or simply that I like and use their products. Remember This ! : The Big What IF??? What if there is a [BIG] correction in the market? (translation: prices are dropping- may have dropped as much as 25%, 35%, even 40%? Sir John Templeton said on Wall Street Week 1/10/97 that such could be expected, as all markets fluctuate. In the meantime, when times are good. While you are waiting for such a drop, park spare money in a money market account or savings account at the bank. It is only necessary to pay enough attention to the stock market to notice the big tops and the deep lows. No one in the history of any stock market has ever been able to time the market perfectly. So don’t try. Only try to be in the bottom third of the down cycle before you take your cash out of savings and spending it to add to your stock accounts. At some point there will be some downward days in this Bull Market. No one can predict the when, or the if, of such an event. It arrived again in Jan 2001, after 8 good economic years of Bill Clinton, together with George Bush. The key to financial success is to buy companies carefully, selecting well established companies that are leaders in their industries (#1, #2, or #3), and that have exposure to wide markets (preferably multi-country, or worldwide markets). Buy only companies with a proven track records of profits and earnings, a low P/E ratio (16 to 24), low Beta #’s, and consider more strongly companies that have a long track record of paying increasing dividends. Hold your stock in a DRIP (Dividend Re-investment Plan), so you can eliminate most purchasing fees. To learn this stuff, check out Value Line at the Public Library (for Free). You would spend more time on choosing a new car’s color. You must be willing to spend enough time to become financially independent. Find out about DRIPs at The Moneypaper, or NAIC (National Assocoation of Investment Clubs). MOST OF ALL, do not panic. You are buying good companies, not the stock market Dow Jones average. Experienced stock investors and those familiar with investing principles will see stock market dips as times when stocks of good companies are on sale. These are buying opportunities at the time others see gloom and doom. Sir John Templeton: “A million dollars invested one day before the 1929 stock market crash, today would be worth $117,000,000 and with reinvestment of all dividends would be worth $250,000,000.” Just take off a few of the zeros and the change for the smal investor is still impressive: $1,000 changes to $117,000, and $250,000. That will help you own a home debt free, or put your grandchildren through college. Don’t forget the need to fund DRIPs. Just opening an account (with the purchase of a single share) will not advance hopes of becoming financially independent. Once the account is open, shares in that company need to be purchased on a regular basis (monthly, quarterly, semi-annually, annually). The actual date of regular purchases is NOT important. The point is not to forget what you are trying to do. Several studies have proven this. The important thing is: to meet investment goals and save for posterity (you) and future prosperity (yours, and “yours”), you’ve got to add money to each account from time to time. Otherwise, the cost of opening the account is wasted, as well as the cost of the share itself should have better been invested elsewhere. My calculations show that at about ten shares in an account, the cost of opening the account for that stock, thereafter becomes negligible on a per-share basis, especially if the share has advanced in price, or if dividends have been paid a couple of times. So, Remember, when you can, send “Old Dad” some money to add to the kitty to add to the accounts. I’ll keep records of whom sent what, when, etc, so if a time comes when withdrawals are appropriate, then it can be done on a fair basis. PS : I think we’re near the bottom of the current low. If you want me to add $$$ for you---- now, is the time for it. It does indicate an opportunity. Love, Dad
(c) Copyright 2006: George Wallace recently published a book on religion which lashes out at nearly all of the comfortable ideas about God, the trappings of organized religion, and the priesthood. His pithy comments and suggestions for a return to a God-centered personal religion will interest everyone. This article may be freely reprinted so long as all copyright attributions, and the full content of this resource box are included. www.OhGodIsThatYou.com
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