When Merrill Lynch hired me as a financial consultant in 1979, investors made their own decisions, kept stock certificates in a safety deposit box and had no idea how much they were worth. They bought local companies like P&G and 5th/3rd and never thought of selling them because a company had a weak quarter. Investors were owners, not traders. And that's the way they got rich. Since I was a medieval history major in college and had never taken a finance or accounting class, those early clients were my teachers. Based on their common-sense examples, I "retired" in 2000 at the peak of the bull market when I was 44.
For a long time after I left the business, I didn't want to think about stocks. There was a great big world to explore. But when the market crashed in September of 2008 and my husband and I watched our accounts decline by 40% almost overnight, I was terrified like everybody else. My adviser had positioned a bunch of stuff I didn't understand, companies I'd never heard of and a lot of mutual funds. It might be OK to delegate investment decisions when the market is treading water, but if it crashes (and it does that on a regular basis) you darn well better know what you own and why you own it. If you don't you're going to do something stupid.
Two years ago I ran into a former client at an event. "Kathy Holwadel," he said. "I used to have a financial consultant by that name." In all those years he'd never found another adviser he liked and asked for a recommendation. But I couldn't think of anybody who managed individual common stocks like I did, so I offered to teach him how to do it himself. First results were not promising with my students (my husband tagged along for the ride) watching every market move and getting nervous at all the wrong times. But I'm happy to report old dogs are perfectly capable of learning how to buy and sell stocks. Both Christopher and Michele now understand what they own, are doing trades commission-free, and beating the market.
I believe the average individual is smart enough to make their own investment decisions. I believe my former industry has drained every last ounce of soul out of the investment process while making obscene amounts of money for themselves. It's been to their benefit to over-complicate decisions that should be more about common sense than head-and-shoulders tops. Investing is fun. It's about psychology, our society, big, fundamental changes in the world. More than anything it's about hope and believing in something. But if you stick your money in a mutual fund and go play golf you miss everything that's wonderful about it.
So I've decided to write a blog in plain vanilla English that anybody can understand, post at least a couple of times a week about my thoughts on the market, what I look for in a good, long-term investment, as well as a little bit of my philosophy of life. And I'm going to give it away for free. If you've ever wanted to learn more about investing, I hope you'll subscribe to DIY Stocks and invite your friends to do the same.
Investors unite! It's time to take back our portfolios. We are smart enough.
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