I Have Some of That!

Not long ago an acquaintance was speaking to me about investing and the recent stock advice from his broker. The friend wanted to know what I thought of the broker's advice to buy several oil company stocks. I told him I had no idea whether that was a good move but that my clients and I have oil stocks in our portfolios. In fact we have most of the oil company stocks. "What about investing in Brazil?" he asked. "We have some that too," I told him. "In fact," I said, "we own a portion of about 14,000 companies. If you name a company or country, the odds are we own some it." Of course, he wanted to know how that was possible.

"You see," I said, "we don't fret about whether we should be buying Exxon or whether Brazil is a good place to invest. I don't have that knowledge. No one does. It's just speculation. Since we're investors and not speculators we invest in a broad cross-section of securities in a highly-diversified fashion. That investing is done not to get the highest returns but to get the appropriate returns with the least amount of risk given our long-term financial objectives. We're all free to stop watching CNBC and reading Money magazine. We feel assured that we'll get exactly the returns the markets will produce in the future. It's a sensible, no-gimmick approach. Sure, it doesn't pay big commissions to brokers and it won't be popular on TV, but meeting our financial goals is all that matters."

My friend went away scratching his head a little, at the same time wondering whether his own life wouldn't be simpler and his financial future more secure if he just embraced sound principles of investing and eschewed speculating.