<THE RULE BREAKER PORTFOLIO>
The Essence of Style
...and Excite Goes Down Under
by Barbara Eisner Bayer (TMFVenus)
WOODSTOCK, NY (June 10, 1999) ï¿½ Imagine yourself in Milan, sitting in front of a runway watching living mannequins dazzle your eyes in a preview of fall fashions. Some outfits elicit "oohs" and "ahs" from the crowd; others force uncontrollable giggles. How could any normal person possibly wear that stuff? From revealing halters to outrageous headdresses, those outfits are simply not your style.
Ah yes ï¿½ your style, that distinctive quality or form that sets you apart from others. You acquire your individual style by sensing exactly what is, and is not, right for you. In our culture there are, and have been, definite leaders whose style everyone can pinpoint -- Jackie Kennedy (elegant), Martha Stewart (obsessive), Courtney Love (wild). And investors, too, have different investing styles which define them -- buy and hold investors, value investors, day traders, etc.
Would you give someone you barely know $100,000 and invite him/her to go to Milan to bring back fashions that will appeal to you? Unless you're wealthy enough not to give a hoot what happens with your one hundred grand, we know the answer. Yet every day, larger amounts of money are turned over by trusting investors to mutual fund managers and brokers for investing sprees. The reason: their belief that someone else knows more than they do. While that might be true at the moment, the ease of information access, be it through the Internet, television, or newspapers, makes every individual capable of acquiring the data necessary to manage his or her own finances.
Unfortunately, many people still cling to others' successes and try to duplicate them instead of developing an investing style of their own. The bottom line is that it's no better to blindly follow a broker's recommendations than to blindly follow any one of our Fool portfolios. If you do that, you're turning over responsibility for your success, or lack of it, to someone else who was never managing your money in the first place.
Developing your own investing style is a little like navigating your way through a sumptuous feast or all-you-can-eat buffet. You must first become familiar with the variety of dishes spread out on the buffet table. If you decide to try one of each type, not only will you bite off more than you can manage, but your stomach will become distended. Not a pretty picture. Trying to digest the cornucopia of different dishes will get you sick. Not a pretty feeling.
For the fashion conscious, think about putting together an outfit for a special occasion by choosing 10 things: a suit, tie, shirt, shoes, socks, tie clip, belt, coat, hankie, and if you're a true gentleman, a hat (our style: a jester's cap). Add anything else, and you're in the land of overkill.
When you go shopping for clothes, you know what you like. A certain jacket or tie will resonate somewhere in your fashion taste buds and say, "Now THAT's for me!" Of course, if you try it on and look like a dope, you won't buy it. But the fact that you had an affinity for that particular piece of clothing surely defines your taste and style.
It's not much different designing a portfolio, except you don't need the hankie. You'll want to choose 10-12 stocks that suit you, whose products you preferably use and whose industries you understand. It's best if you feel an affinity for the companies and a desire to follow their progress on at least a quarterly basis. If that's too overwhelming, opt for another "style." Investing in an index fund or the Foolish Four approach are successful styles unto themselves, akin to the concept of modular dressing, in which you choose an outfit and then get various pieces that all work together, simply and easily.
The trick is to learn about the variety of choices out there. Here in Fooldom, you can find a basic guide to building a portfolio in our 13 Steps to Investing Foolishly. As you read through it, consider which of the techniques appeals to you and would comfortably jive with your tastes. Then, learn about the various Foolish options for adding color to your investing wardrobe -- the risky and adventurous Rule Breaker, the solid titans of the Rule Maker, the value lovers of the Boring, the effortless success of the Foolish Four, the steady contributors of the Drip Port, or the no-brainer approach of Harry Jones. In addition, visit our Portfolio Management message board for further discussion of these ideas.
The Rule Breaker port was down 2% today, in line with the overall trend of a market reacting nervously to a possible rise in interest rates. We Fools are well aware that over the course of our life in the market, interest rates will rise and interest rates will fall. However, when you're in it for the long haul, they will eventually even themselves out.
On the news front, what really caught my eye was a study from the University of Texas that found that U.S. companies generated a mind-boggling $301 billion in revenue last year from online-related goods and services. This was in dramatic contrast to the anticipated number, which was tens of billions. These figures put the Internet portion of our economy on a par with more established sectors like automobiles and telecommunications. Considering that three years ago there was no online commerce at all, it is unlikely that we will see this bubble bursting any time soon.
Also in today's news, Rule Breaker holding and cable-based Internet service provider Excite@Home (Nasdaq: ATHM) has formed a joint venture with Australia's Cable & Wireless Optus to market its high-speed cable Internet service to 2.2 million Australian homes along Cable & Wireless Optus's broadband network Down Under. There may be trouble in cable paradise in Portland, but that's not going to stop Excite@Home from taking a leading position in the global market. So to all our friends down under, grab a Foster's, throw a shrimp on the barbi, and enjoy a little high speed connection to the Internet!
And please don't miss our "Amazon.bomb" Special Feature, wherein last week's Barron's piece is dissected by Fooldom's finest.
Barbara Eisner Bayer TMF Venus
Day Month Year History Annualized R-BREAKER -2.00% -7.63% 23.62% 1140.82% 68.15% S&P: -1.19% 0.09% 6.32% 197.80% 25.26% NASDAQ: -1.38% 0.57% 13.31% 245.00% 29.12% Rec'd # Security In At Now Change 8/5/94 2200 AmOnline 0.91 105.75 11535.58% 9/9/97 1320 Amazon.com 6.58 115.94 1662.17% 5/17/95 1960 Iomega Cor 1.28 4.38 241.69% 2/26/99 300 eBay 100.53 182.69 81.73% 12/4/98 450 Excite@Hom 56.08 92.88 65.61% 4/30/97 -1170*Trump* 8.47 5.38 36.53% 2/23/99 300 Caterpilla 46.96 61.88 31.75% 7/2/98 470 Starbucks 27.95 35.44 26.77% 2/23/99 290 Goodyear T 48.72 61.75 26.76% 12/16/98 580 Amgen 42.88 53.69 25.22% 2/23/99 180 Chevron 79.17 93.25 17.79% 2/20/98 260 DuPont 58.84 68.25 15.98% 1/8/98 425 3Dfx 25.67 16.75 -34.74% Rec'd # Security In At Value Change 8/5/94 2200 AmOnline 1999.47 232650.00 $230650.53 9/9/97 1320 Amazon.com 8684.60 153037.50 $144352.90 2/26/99 300 eBay 30158.00 54806.25 $24648.25 12/4/98 450 Excite@Hom 25236.13 41793.75 $16557.62 12/16/98 580 Amgen 24867.50 31138.75 $6271.25 5/17/95 1960 Iomega Cor 2509.60 8575.00 $6065.40 2/23/99 300 Caterpilla 14089.25 18562.50 $4473.25 2/23/99 290 Goodyear T 14127.38 17907.50 $3780.13 4/30/97 -1170*Trump* -9908.50 -6288.75 $3619.75 7/2/98 470 Starbucks 13138.63 16655.63 $3517.00 2/23/99 180 Chevron 14250.50 16785.00 $2534.50 2/20/98 260 DuPont 15299.43 17745.00 $2445.57 1/8/98 425 3Dfx 10908.63 7118.75 -$3789.88 CASH $9924.87 TOTAL $620411.75Note: The Rule Breaker Portfolio was launched on August 5, 1994, with $50,000. Additional cash is never added, all transactions are shared and explained publicly before being made, and returns are compared daily to the S&P 500 (including dividends in the yearly, historic and annualized returns). For a history of all transactions, please click here.
</THE RULE BREAKER PORTFOLIO>