Let's face it: Children, from toddlers on up to teens, are not known for their patience and forethought. Kids want what they want, and they want it now. It doesn't matter what it costs, or whether it's worth it. If you don't believe me, try this little experiment. I dare you. I double-dog dare you.
Buy your teen an MP3 player from Sony and jeans from Gap
How do you think that will work out? Yeah, I know. So what if I told you that every time the apple of your eye huffed and puffed or merely pouted, instead of costing you money, it might make you a few bucks? Sound impossible?
It's not. The world's biggest tantrum-tosser gives you this opportunity all the time. It's called the stock market. It's a place where all the brains and technology in the world can't overcome base and immature urges like peer pressure, childish greed, and mindless panic.
It's a place where great financial minds will encourage you to buy what's new and hip, no matter what the price. Shares of Research In Motion
And if you think the Street's youthful exuberance can cost you, wait until it pitches a fit. That's when analysts and fund managers who are quite capable of determining a firm's real financial value ignore lead-pipe bargains and scream "Sell!" Why? To be cool, like the rest of the kids.
Here's how it works in the Wall Street Romper Room: You gotta get out if you think the next guy's gonna get out, because you want to be first. On the flip side, you have to buy what everyone else likes, no matter what it costs. In the world of the Wise, as in the world of children, it's OK to engage in ridiculous behavior -- so long as you're not alone in your absurdity.
But there is another way: Invest like a grown-up.
It's a method followed by minor (and by that I mean major) successes like John Neff, Warren Buffett, David Dremen, Bob Olstein, and others. And it's a path we follow at Motley Fool Inside Value.
It's pretty simple, really. It's refusing the urge to fall for the overpriced hot new item. It's looking for the quality firms that the fickle kiddies have tossed aside in their Streetish fits. It's buying Nokia in the summer of 2004, after it had been through some tough times, and seeing it rise from $12 to near $17 in only a few months. It's snapping up shares of Inside Value's inaugural pick, MCI, and seeing similar 40% returns.
Don't get me wrong; we don't expect quick bucks like these all the time, and we endure our share of sinkers -- just ask us about Fannie Mae
For related Foolishness:
- There's trouble with the next big thing.
- But there are also dirt-cheap dream stocks out there.
- Tuning out the talking heads is another part of the journey to financial adulthood.
This article was originally published on June 3, 2005. It has been updated.
Seth Jayson is a recovering growthaholic. That's right, he was addicted to growthahol. At the time of publication, he had no position in any firm mentioned. View his stock holdings and Fool profile here . Fannie Mae is an Inside Value pick. Gap and Palm are Motley Fool Stock Advisor recommendations. Fool disclosure rules arehere.