Why Invest?

September 19, 2015

I was a big ears kid who listened well to the adult conversations, a little to the consternation of my aunt. The phrase that always got my attention was attached to one of my uncle’s best friends, as well as a few others. That phrase was “he made a lot of money in the stock market”. Seems my uncle’s friend was a bit of a party guy and wild man growing up.   Shortly after college and the Second World War he took a job as a stock broker. He started coming to dinner parties and advising everyone who would listen to invest in a low priced company with a new product that was going to be revolutionary. Hock the jewelry, sell the car, and buy as much of this stock as you possibly can. He followed his own advice. The company was Polaroid.   He made a small fortune.

I couldn’t get involved in the stock market, but when I was eight years old I found a market that fit my budget and featured assets that increased in value. I began to collect Lincoln Head Cents in the blue tri-fold books I got at the Hobby Shop. The impetus was the fact that my friend’s grandfather had a really fine coin collection in an upstairs room with tall windows and bookshelves on all three sides. As an eight-year-old the windows seemed really tall, let in a phenomenal amount of light, and produced that feeling of a warm comfortable place on rainy dreary days. The main attraction was the coin collection and we boys rarely ventured into this room without Bill’s grandfather. He would open the books and show us pennies worth nickels, and nickels worth dollars. We were wide eyed.

The key factor for my young mind was that there were coins worth more than other coins of the same denomination, based on certain factors. I was never considered good at math, but it was not lost on me that when you had a nickel that was worth ten cents, you had just doubled your money. If you had a nickel that was worth a dollar, or five dollars, or ten dollars, could it possibly get better?

As soon as I got a job and had a few extra dollars I found a stock broker recommended by an experienced investor friend and began to buy and sell penny stocks.   That world was different from the warm well-lighted place with the kindly grandfather. The stock market is a jungle environment. The proper action is often counter-intuitive.   There are experienced investors only too glad to profit from your mistakes. This is how the jungle works.

You must learn to protect yourself in a hostile environment. There are many challenging environments that come to mind. The jungle is one. The sailing ship in the stormy sea is another. The point is the stock market works like a force of nature. You can be swallowed up and lose all your money. You can be blown off course and drift helplessly with a leaking ship.   The market is like the weather. Sometimes it’s sunny, sometimes it’s miserable, sometimes it’s treacherous.