<THE DRIP PORTFOLIO>
Begin '99 Foolishly
...the Drip Port takes stock
by Jeff Fischer (TMFJeff@aol.com)
Paris, France (Jan. 6, 1999) -- Still spinning from the craziness of the holidays (while marveling at how the days roll by, sunrise to sunset, with reckless speed), let's slow down today and discuss what we're doing here, what we hope to accomplish, how we can help each other reach our goals, and why any Fool should care.
The Drip Port is America's portfolio. It's a portfolio that over 90% of the population (if not more) could partake in with little effort or altering of lifestyle. The Rule Maker or Rule Breaker Portfolios are accessible to everyone on some level, but many Fools don't have $50,000 or $20,000 to drop into the stock market at once. In contrast, the Foolish Four approach can be started with a few thousand dollars, making it more immediately accessible. But, a Drip investment strategy can be launched with under $100, and that's about where a majority of people stand in a financial sense: with less than $100 net to their name.
Most of the country (and indeed the world) has very modest savings if any at all, and most people have modest means with which to begin investing. If you're reading this online (as you almost certainly are), you're already in the leading minority. Most people don't have computers or online access. The dilemma, then, is how do we reach most of the people in the world who don't invest, but who could begin Drip investing with the $100 that they have squirreled away in a sock drawer? The initial answer involves grassroots.
In conversation with people about investing, we (meaning a Drip investor like you or me) often meet people who have no idea that they can buy stock directly from companies and begin with only one share. Most people don't realize that they can use a company as a savings account, investing $10 to $100 to $5,000 or more in companies like Coca-Cola or Pfizer every single month that they care to. If Drip investors like you and me want to start 1999 on the right foot by helping others, please share the benefits and realities of Drip investing with anyone you know who needs to learn about it. Print this column and hand it to a coworker or family member. And if they don't have a computer and they're a potential new investor, tell them to pick up a copy of the Fool's You Have More Than You Think bestseller, or buy a copy of the book for them yourself as a New Year gift.
As a reader of this column, you already know how successful a strong Drip-investing strategy can be, as well as how beneficial the strategy is to the average person's financial lifestyle. You don't need to hear about it again. But someone that you know probably does, and that is how we should begin 1999.
Every one of us (I consider the Drip Port's thousands of regular readers a community of friends who invest in like fashion) should try to help at least one other potential Fool begin Drip investing, if Drip investing indeed suits our friends best. In order to give this printed column to someone (or e-mail it), let's provide potential investors with background on the Drip Port. This is an important review (taking stock of our mission and status) for all of us to begin 1999 with, too.
1) We're regular investors, simple Fools if you will, but we're investing to beat the market and the pros. We don't have inside knowledge of companies. What we know we share in this daily column. We don't have special strategies or pretend to be sophisticated investors. There actually isn't any such thing. Successful investors are best created by being invested in understandable, strong companies for long amounts of time, not by so-called fancy investment styles. This is our style: to begin investing small (with one share of stock) in strong companies; to then buy more shares commission-free whenever possible, usually monthly; and to invest with at least a twenty-year timeframe. We don't pretend to be fancy.
2) We began with $500 in the summer of 1997, and we have added (and regularly invested) $100 in savings every month since then. You can begin with much less or more money, and you can save and invest much more or less each month, too. Our goal is to return over 15% annualized on our investments for 20 years, growing an eventual $24,500 investment into $150,000. The only magic behind this number is the magic of strong companies' ability to grow earnings per share over 11% annually, and then to earn a premium valuation on the stock market every year for doing so. Dozens of leading companies (Coca-Cola, Pfizer, J&J, Mellon) have shown an ability to grow earnings per share double-digits, on average, for years on end.
3) We don't time the stock market and we don't particularly care if it rises or falls in the near term. With our style of investing, we send more money to our investments every month. Therefore, we're often actually pleased when the stock market declines, because it means that we can buy more shares of our companies for the same dollar amount. We're also pleased when our stocks rise, because it means our account is worth more. Our type of investing leaves little room (at all!) for worrying about the gyrations of the stock market. Instead, it finds a way to appease you whatever the stock market does. On the Fool's Drip message boards, this fact was listed as one of the primary benefits to Drip investing. It's a key reason why average Fools like to invest this way: the stock market's volatility doesn't matter.
4) We provide a daily column covering our companies or potential new investments as a way to not only educate, enrich and amuse, but as a means to provide the shared knowledge of Fools everywhere. Brian, Vince, Runkle, Racerboy, and anyone else who writes this column doesn't have any advantages over anybody else. We're all Foolish investors just like you. We began with little knowledge and largely taught ourselves with the help of other Fools. Runkle likes Coca-Cola and Home Depot, as well as Intel. Racerboy loves Exxon. Brian is looking to buy his first Drip. Vince is a pharmacist who knows J&J and Pfizer products from daily experience. We use this column best, however, when we relate the shared knowledge that every Drip investor offers on our message boards. That is where the Drip community truly resides, and it's where questions are answered directly, and paths to good investing are found daily. This column is a touchstone for that community.
5) We reiterate and answer in e-mail every week that you can begin investing for under $100 and you can succeed with but a few Foolish investments. The heart of the Drip Port's message is that anyone can begin to invest successfully with very, very little money. The types of companies that we believe you should buy are those that you already know: leading pharmaceutical, consumer goods, beverages, food, and technology companies, to name some industries. This portfolio began with one share of Intel. It next bought one share of Johnson & Johnson, then Campbell Soup, and finally Mellon Bank. We won't over-diversify. We'll invest across a handful of key industries, but we aren't likely to own more than 8 stocks. The myth that you must own 20 or 30 stocks has been propagated (for decades) by brokers who want to earn higher trading commissions from you. In reality, the world's most successful investors have their wealth highly concentrated in just a few key investments.
6) How do you participate and begin? Anyone can participate by first reading this portfolio's background information, linked in the top right of this page. Anyone can begin to Drip invest once they understand the process (explained in that information) of buying one share of stock and enrolling in a company's direct purchase plan, or Drip (also known as a dividend reinvestment plan). Most companies only require that you own one share of stock to enroll. Meanwhile, in this portfolio's background we explain the types of companies that Fools should consider for their investing dollars.
7) Why should anyone care? Money is listed as a primary concern for a majority of individuals and couples in the U.S. as well as around the world. Drip investing is a very simple way -- one that even offers a fun and rewarding process -- to begin putting small amounts of money into the largest, highest-quality investments in the world. It's like having Poseidon on your side when you're but a tiny fish in his giant sea. There is no better way (that I know of) for the average citizens of earth, with their average few hundred dollars or so in net savings (or less), to begin building a financial future than by coat-tailing on the very companies that provide their daily needs. Invest in the companies that provide the world its needs.
If you know of someone in your life who wants or needs to begin saving and investing with modest sums, please try to help them, Foolishly. Point them in our direction with an e-mail, an old-fashioned letter, a phone call or even a tap on the shoulder -- including friends or family who just got a new computer. Begin 1999 by helping someone else. Once you have, it makes investing for yourself that much more rewarding.
Next week we'll continue our oil and gas industry study. In a few weeks, earnings reports will begin to flow in from our companies. We'll look at those with a long-term detachment that makes it pleasurable!
Fool on in '99!
Make a Living Foolin' Around.