Drip Portfolio They Say You Can't Invest
The Wise call all of us to the mat

The Wise have shouted from their ivory towers what sounds like a challenge: You, the individual, they say, cannot invest well! You should give your money to the professionals. In this column originally from July 7, 1999, and updated for today, Brian Graney shouts back our very Foolish answer.

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By Brian Graney (TMF Panic)
December 19, 2000

This is the moment that everyone has been waiting for. The verdict is in, the votes have been tallied, the fat lady has sung her last note and is now heading for her dressing room to look for a post-performance snack. To all of you individual investors out there wondering if you can outperform the market, here's your answer:

Drum roll please

YOU CAN'T DO IT.

That's right, just quit while you are ahead. The stock market is too hard for mere mortals to figure out, so stop trying. You can't invest well. Give your money to a professional investment adviser, if you know what's good for you.

(This news flash provided courtesy of your local font of Wisdom.)

*                  *                  *

I normally refrain from calling the Wise onto the carpet for their frequent fits of irrationality. Best to leave that to others and focus on valuing business, I say. However, I could not resist highlighting this doozy, which I came across in my reading last week. It comes from the pages of a very prestigious business daily, whose publisher's name happens to rhyme with Cow Drones:

The fact is, while individual stocks may make sense for wealthier and more-sophisticated investors, most of us just don't have enough money to build a well-rounded portfolio that includes 20, 30, or even more individual stocks. We need the broad diversification that comes with stock mutual funds.

Well, if that doesn't get the blood of Drip investors everywhere pumping, I don't know what will. While Fools groan at this lamentable but still all-too-common point of view, we should thank the author for providing us with a neat 47-word reminder of what we are fighting against as individual investors. Our goal with this portfolio, as well as the goal of scads of other Foolish Drippers, is to prove that this line of thinking is absolutely, unequivocally, flat-out, no-bones-about-it wrong.

In fact, we think every single aspect of that statement is incorrect (outside of the punctuation, which our Editor Fools feel is passable). Here at the Drip Port, we're only investing $100 per month, so we hardly qualify as wealthy investors able to throw tons of money around. Judging from Jeff's table manners, we're certainly not sophisticated either. And as far as diversification goes, we're only planning on investing in seven or eight companies, at the maximum, in industries that we know well and understand. "We will avoid diversification for diversification's sake at all costs" is our rallying cry.

Successful Drip investing is not predicated on how much money you are starting out with or how many degrees you have framed on the wall in your den. It is determined by much simpler traits, chief among them discipline, patience, and common sense combined with a long enough time span to take advantage of the wonders of compounding. While those later concepts are less tangible and more difficult to quantify than the former, we intend to prove that they are far more valuable to an investor in the long run.

This is not to say that every proponent of mutual funds (excluding index funds, which we view as one of the century's great financial innovations) is wrong and deserving of our scorn. Rather, mutual fund proponents are the folks who need Foolishness the most, both to better their own financial situations and the prospects of those around them that value their opinions. So, consider giving your Wise friends some Foolish investing books for a different perspective!

As Fools, we acknowledge all views and interpretations on the subject of investing. That individuals can and do have differing opinions is a central foundation for the stock market as a mechanism for uniting stock sellers with stock buyers and for our own Foolish community as well. We have no interest in suppressing naysayers or speaking from an ivory tower. As Tom Gardner has put it, "We're not into character assassination but performance assassination."

The message the Wise would have you believe is clear: "You can't do it, only investing professionals can do it."

Well, investing professionals and Wise commentators alike, meet us back here in 2017 and we'll find out exactly what individual investors can and can't do. And if you, Foolish reader, are an investor just starting out, hear our message loud and clear: Using your common sense, your curiosity, and your sense of humor during tough times, you can do it, and do it very well! Start with the 13 Steps to Investing Foolishly. And don't forget that Fools are here for you -- here and on the discussion boards every day.

Fool on!

Drip Portfolio


12/19/00 as of ~8:30:00 PM EST

Ticker Company Price
Change
Daily Price
% Change
Price
CPBCAMPBELL SOUP1.003.16%32.69
INTCINTEL CORP0.190.56%33.44
JNJJOHNSON & JOHNSON0.630.63%99.19
MELMELLON FINANCIAL CORP(0.75)(1.47%)50.13
PEPPEPSICO INC(0.13)(0.25%)49.19

  Day Week Month Year
To Date
Since
Inception
(7/28/1997)
Drip(0.01%)3.06%(2.67%)7.36%27.82%
Comparable S&P 500n/an/an/an/a12.35%
S&P 500(1.30%)(0.50%)(0.71%)(11.14%)39.07%
S&P 500 (DA)(1.27%)(0.49%)(0.70%)(10.95%)41.70%
NASDAQ(4.30%)(5.34%)(3.32%)(38.28%)60.02%

Trade Date # Shares Ticker Cost/Share Price Total % Ret
10/7/9837.4877MEL34.8350.1347.14%
9/8/9752.2886INTC24.8933.4434.86%
11/14/9716.236JNJ80.1199.1926.06%
7/28/006.12PEP47.3949.193.80%
4/13/988.465CPB53.8132.69(35.66%)

Trade Date # Shares Ticker Total Cost Current Value Total Gain
10/7/9837.4877MEL$1,305.64$1,879.07$615.51
9/8/9752.2886INTC$1,301.42$1,748.40$453.70
11/14/9716.236JNJ$1,300.69$1,610.41$338.94
7/28/006.12PEP$290.00$301.03$11.03
4/13/988.465CPB$455.50$276.70($162.45)
 
Cash: 
Total: 
$0.02
$5,815.63
 


Key
• S&P 500 (DA) = dividend adjusted. Dividends have been added to the total return of the index.

Note
Drip Port launched with $500 on July 28, 1997, adds $100 to invest every month, and the goal is to own $150,000 in stock by August of the year 2017. Due to the slow nature of dollar-cost-averaging and our relatively significant starting costs, we do not expect to seriously challenge the S&P 500 for the first three to five years as we build an investment base. The long-term advantages of dollar-cost-averaging still overcome the short-term disadvantages, however. Final note: our investment in Campbell Soup is frozen due to fees instituted in its investment plan. Click here for a history of all Drip Port transactions.