Fool Portfolio Report
Thursday, August 14, 1997
by Tom Gardner (TomGardner)
ALEXANDRIA, VA, August 14, 1997 -- The Fool Portfolio gave a little back to the Wise today, falling 0.46% versus S&P gains of 0.30%. Phooey!
There is very little news to speak of in this space today. I'd even go so far as to say there were few meaningful announcements today on the entire market -- but I don't want to hurt activity over at our Evening News department. Only two of our companies spoke up to the people.
Our telecommunications giant and the FCC filed a formal complaint today that the local phone markets aren't being opened for competition speedily enough. FCC Chairman Reed Hundt is nudging Congress to give his agency more power to drive home 1996 telecommuncations reform which he claims ain't working. T closed up $1/8.
Only one other of our companies had something new to talk about, and it wasn't much more consequential than the first:
3Com Corp. (Nasdaq:COMS), announced
today that the company has closed on the
purchase of a 400,000-square-foot facility on
40 acres, that it has been leasing since 1996,
in Rolling Meadows, Illinois.
COMS closed up $1 5/8 to $55 3/4.
The general lack of news on Wall Street leaves me a perfect opportunity to cover some financial hurdles that we think Fools should o'erleap before entering our Hall of Portfolios looking for investment ideas. In this area, we naturally spend most of our time talking about accounts receivable, earnings news, management's directives, the power of brand marketing, the danger of high commissions, the rewards of long-term investment in common stock. We do not focus much on personal finance issues, leaving that to our Fool's School.
But today, I'll take a page out of their book by presenting eight tasks we think you'll need to take care of before investing in stocks.
1. Understand Your Debt Situation
Before you even think about investing, unsuit your calculator and drop pencil on paper to determine what financial obligations are facing you over the next 5-10 years. Will you need to borrow $35,000 to pay for the next two years of business school? Oo-oo-ooph. Do you have twenty-two years of $15,000 payments to make on your house -- at 7.5% interest per year?
Before you visit the Hall of Portfolios, we hope you'll itemize and analyze your debt situation.
2. Know That All Debt is Negotiable
You may know this, but if not, you do now. All of your debt is negotiable. If you're paying exorbitant 18% interest rates on your credit-card debt, give them a call, bargain down those rates, or move to a new creditor. That student loan you're paying down -- you can probably both have the total amount slashed and the interest rate lowered. No kidding. Hey, you may have to show hardship -- but that's easy enough. If you need some tattered motley rags to borrow for the visit, just float us an e-mail.
Fool, treat all debt as negotiable. Bargain, banter, bewilder, bedazzle, and bemuse them.
3. Pre-pay All Prepayable Debt
Yes, this is a uniquely Foolish notion. Good people disagree with us on this one. But my belief is that you ought to pay down all prepayable debt. Rather than tie your cash up in stock investments trying to beat mortgage payments at a 7.5% rate, just pre-pay that debt. The market is too inconsistent, commissions are too expensive, and capital-gains taxes are still too taxing. Beating loans rated above 5% per year with common stocks is not a game we'd be involved in. And on debt rated below 5%, do yourself the administrative favor and pay it down.
Yep. It may not be popular. But we think you should take the tax-free, risk-free growth that comes from paying down your debt.
4. Turn Your Necessities into Luxuries
Here's another unusual one. As much as your cash will allow it, we recommend turning your basic necessities into luxuries. Food, water, sleep, shelter, and human contact -- we think you should pony up the cash to gain full enjoyment from these. Trying to save money for investment by cutting back on meals, wearing the same t-shirt for two weeks running, working through until 2 AM and waking up with the sun. . . we don't think that's a good idea. You only live once. Your necessities are what make you a living, breathing being. Feed them, Seymour.
Rather than cutting back on necessities to raise money, extend them into luxuries as best you can.
5. Spend Less on Non-Necessary Luxuries
In conjunction with item four, we would actually suggest that many Americans ought to dramatically reduce the payments they make for the luxuries that aren't necessities. If music isn't fundamental to your life, skip the XL Dominator Sound System. And much as Japan wants you to think it, you are not your car. You probably need a car, but why spend a small fortune on that depreciating asset. When you drive your new jalopy off the lot, it'll lose 30% in value. No, we're not advocating skipping the stereo, the CDs, the roadworthy car, Pentium power or, heck, your own jet. But we do believe that the best place to find new funds to invest in the greatest of all places, the U.S. stock market, is to dig them away from luxuries.
Fool, begin monitoring and reducing any price-unconscious buying of luxury items.
6. Halt "Play Money" Allocation
Yep, we're squeezing all the fun out of your life. We're guiding you to the Soundstage VH-3000 rather than the Soundstage VH-7000. We're suggesting that you might liberate yourself from the fun of buying expensive gadgetry. We're even trying to mess with your relationship with your car -- symbol of your Americanism. We're losing you. You're thinking of bagging The Motley Fool, and searching for other financial sites. And now, gasp, here we are positing that you treat none of your savings as "play" money. Oh, brother, we're toast.
By play money we mean that money given over to gambling, lottery stubs, Arizona real-estate bought sight unseen, private financing in a biotechnology start-up because you took one botany class in college, speculation on foreign penny stocks pitched by a grizzly-sounding unknown broker, and any money you were planning to loan to your cousin, Al, who still hasn't paid you for the dirt bike you unknowingly bought for him five years back.
You can have a good deal more fun investing or spending your money on things that you both believe in and know thoroughly well. Avoid allocating funds as "play money."
7. Whenever Possible, Let Other People Pay For You
8. Learn Before You Invest
When you knock down the previous seven items, we think you're very close to being ready for our Hall of Portfolios, for your own investment strategy, for socking money away into what we consider the most enjoyable game around. Investing in common stocks brings you hundreds of variables to assess, the need for discipline and method, and now hundreds of thousands of Fools looking to chatter online, to meet for weekly cocktail parties across the country (just wait till we get that going!), and to learn from.
This is the easiest of all eight. Learn before you invest. It's the only way to make this more about spirited fun over the long term than anxiety over the next couple of weeks, months, or years. No one at Fool Global Headquarters that I know of is anxious about the possibility of a 20% decline in the stock market.
I hope those eight items are helpful. Feel free to forward them via e-mail to any your friends thinking of investing. And, of course, we hope you put them into play many months ago.
Drip Portfolio --
The market and Coke.
Fool Message Boards -- Speak your mind!
Boring Portfolio -- Boring on the move.
Fool Four Portfolio -- 23% annually, historically.
Evening News -- What goes down a little.
Port Tracker -- Update your portfolio daily.
Daily Double -- Excite
Daily Trouble -- Dataworks, Corp.
Fribble -- A fun short lesson from readers.
Stock Change Bid ---------------- AOL - 1/2 67.13 T + 1/16 39.75 ATCT - 1/16 4.56 CHV - 7/16 78.56 DJT + 1/16 9.88 GM --- 61.00 INVX -1 31.88 IOM - 1/2 23.00 KLAC -1 1/8 64.50 LU +1 11/16 84.25 MMM + 7/8 94.75 COMS +1 5/8 55.75Day Month Year History FOOL -0.46% 1.73% 17.57% 213.78% S&P: +0.30% -3.10% 24.84% 101.74% NASDAQ: +0.21% -0.45% 22.90% 120.31% Rec'd # Security In At Now Change 8/5/94 355 AmOnline 7.27 67.13 823.31% 5/17/95 980 Iomega Cor 2.52 23.00 812.70% 10/1/96 42 LucentTech 47.62 84.25 76.94% 8/11/95 125 Chevron 50.28 78.56 56.23% 8/12/96 110 Minn M&M 65.68 94.75 44.27% 8/24/95 130 KLA-Tencor 44.71 64.50 44.26% 8/13/96 250 3Com Corp. 46.86 55.75 18.97% 8/12/96 280 Gen'l Moto 51.97 61.00 17.37% 6/26/97 325 Innovex 27.71 31.88 15.03% 8/12/96 130 AT&T 39.58 39.75 0.44% 4/30/97 -1170 *Trump* 8.47 9.88 -16.60% 10/22/96 600 ATC Comm. 22.94 4.56 -80.11% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 2581.87 23829.38 $21247.51 5/17/95 980 Iomega Cor 2594.53 22540.00 $19945.47 8/11/95 125 Chevron 6285.61 9820.31 $3534.70 8/12/96 110 Minn M&M 7224.44 10422.50 $3198.06 8/24/95 130 KLA-Tencor 5812.49 8385.00 $2572.51 8/12/96 280 Gen'l Moto 14552.49 17080.00 $2527.51 8/13/96 250 3Com Corp. 11714.99 13937.50 $2222.51 10/1/96 42 LucentTech 1999.88 3538.50 $1538.62 6/26/97 325 Innovex 9005.62 10359.38 $1353.76 8/12/96 130 AT&T 5145.11 5167.50 $22.39 4/30/97 -1170*Trump* -9908.50 -11553.75 -$1645.25 10/22/96 600 ATC Comm. 13761.50 2737.50-$11024.00 CASH $40625.59 TOTAL $156889.40