I think I've already confessed in this space that I watch a lot of television. (Pathetic defensiveness: I do read plenty of books, too.) I'll make an even-more-sordid confession now, that I've watched more than a few episodes of Survivor and Big Brother. Since I'm paid to think and write about investing, it's perhaps not so surprising that I've been pondering how these shows might relate to stocks and portfolios.
First, quick descriptions, for those who actually have lives and haven't seen the shows:
Survivor: Sixteen castaways on an island; surviving on rice, occasional fish, coconuts, rice, and rice. They're given regular mental or physical challenges to win rewards or temporary immunity from banishment. They meet regularly to vote one castaway off the island. After 39 days, a winner is chosen, and the winning prize is a million dollars.
Big Brother: 10 "house guests" are sequestered in an IKEA-furnished house with some chickens and a pug dog. Cameras and microphones everywhere film them all the time, and feeds run continuously over the Internet. These folks are also issued challenges, where they win or lose food money. Every two weeks, they nominate two or more people for banishment. Viewers then vote someone out. After 3 months, a winner is selected and wins $500,000.
One fascinating thing about Big Brother is that the house guests have absolutely no privacy. If they whisper to each other, Big Brother bellows into a speaker, asking what has just been said. It's a weird way to have to live. It occurs to me that if my investing activities were being monitored 24 hours a day by the public (not to mention a Big Investor), I'd probably do some things differently.
For example, I set up a Roth IRA recently and bought a few (very few) shares of Celera Genomics (NYSE: CRA) and Healtheon/WebMD (Nasdaq: HLTH) for it. Did I do a lot of due diligence on these purchases, researching every aspect of the companies? Not exactly. I did read many articles on them, but I didn't crunch many numbers. And worse, I haven't been keeping up with them very much (except to note that I'm up about 200% on one of them and down roughly 70% on the other). I know why I invested this way in this case (expedience in the face of extreme busy-ness, hopefulness based on limited reading), but I don't know that I'd enjoy having millions of people scrutinizing my actions.
Worse still would be if my portfolio of several years ago were on public display. I was learning painful lessons frequently in those days. (Read a sample blunder in our recent "When Fools Were fools" feature.) Put your investing to the Big Brother test -- what aspects of your portfolio would you not want anyone to see, and why? How would you invest differently, if everyone were watching? This can be an illuminating exercise.
Another lesson from these shows is how they remind us that the unexpected can happen. On Survivor, the castaway who was arguably the least popular among viewers was the one who won. On Big Brother, the house guest voted most popular (by a considerable margin) by viewers was ejected by viewers a week later. In both cases, if you learn more you might see that these unexpected events shouldn't have been so surprising.
It's the same with investing. Don't be lulled by several years of a rapidly advancing stock market into assuming that double-digit growth is always to be expected. Be ready for surprises. (Be ready, for example, for a stock you buy to tumble 70% if you're not paying attention. And, for a stock you buy to tumble 70% even if you are paying attention!) Be prepared to deal with the unexpected.
One more way that thinking about these two television shows might help your investing is if you imagine sitting around a campfire surrounded by all the companies in your portfolio. Then imagine that you have to kick one of them out of your portfolio -- which company would get the boot? Whichever one you pick is probably the holding you believe in least. Continue the exercise until you're down to one holding -- your winner.
This process may help you see how much faith you have in the companies you've invested in. Compare these results to how much money you have invested in each holding. If Quidditch Supply Inc. (Ticker: SNITCH) is the first company you'd eject, and it represents 30% of your portfolio, then you might want to reconsider things. Similarly, if the holding you have the most faith in (based on research, of course!) represents just 3% of your portfolio, that might also be a red flag.
So, there you have it -- the end of my attempt to wring some value from some popular television programs. If you have any thoughts to share on this article -- or additional lessons -- post them on our Television Banter or Rule Breaker Strategies discussion boards.
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