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A FRIEND ASKED ME if I was buying cryptocurrencies or nonfungible tokens. When I replied that I was not, my friend asked if I was afraid that I was missing out on the investment of a lifetime. That got me thinking about three great investments where I did indeed miss out.
First, in 1981, some young engineers were sitting around talking about what we should invest in. One fellow said he was going to buy a share of Berkshire Hathaway, which was then selling for about $500, equal to a week’s salary. In my wisdom, I said that the stock had performed superbly, but CEO Warren Buffett was 51-years-old and unlikely to stick around much longer. In fact, he’d probably have to retire when he turned 65, a scant 14 years hence.
One share of Berkshire Hathaway (symbol: BRK-A) now costs almost $500,000, for an annual return of about 18%. Had I invested the money in an S&P 500-index fund, the price appreciation would have been about 9%. I could add a few percent to the S&P’s return to account for dividends. Still, I clearly missed out on a great stock purchase—and, unfortunately, I didn’t even invest in an S&P 500 fund. More on that later.
Next up: In 1990, feeling like I’d missed one great stock picker, I chose another. I purchased Fidelity Magellan Fund. While people today pay zero trading costs, I paid Fidelity a 3% load, or commission, to invest with the great Peter Lynch. Sadly, two months after I purchased the fund, Lynch decided to retire. I never saw the great returns that Magellan had earned in its early years.
Note that Lynch was only age 44 when he retired. That’s seven years younger than Buffett was when I was concerned that he would retire.
My final miss: I graduated from college in 1981. That was five years after Jack Bogle launched the First Index Investment Trust, which would later be renamed Vanguard 500 Index Fund.
I regularly read The Wall Street Journal and Barron’s. I stayed current on the latest investments. Yet I didn’t invest in any index fund until 1990. Shortly after Lynch’s retirement, I decided to forget about finding the next great investment guru and purchased Vanguard 500. I had lost nine years chasing the latest hot hand, either paying steep trading costs or paying mutual fund loads and high management fees.
Despite my three misses, our investments have been satisfactory. We’ve provided our children with world class educations. We have been able to travel widely with them, both in the U.S. and abroad. We have a nice home and a secure retirement.
So am I worried about not getting in on the ground floor of cryptocurrencies and nonfungible tokens? Not really. Perhaps I’m missing the opportunity of a lifetime. But—like missing Buffett and Lynch—I think our life will still be just fine.
I can tell a similar story about BH, which clearly illustrates why stock picking is so difficult – and seldom successful. Like market timing, it relies almost entirely on chance. For most of us, the more reliable investment strategy is to save early, save often and put a reasonable portion of your savings “at risk” (i.e., equities). Add reasonable diversification and lower fees, and in 20-30 years, you might just have a fairly significant nest egg!
When my parents both passed away my brother and I executed their seven figure estate. Most of it was accounts at brokerage houses but in their lockbox were actual stock certificates my dad had for $80,000 worth of Walmart stock. He had paid $1,000 for the stock when he bought it. 80 to 1 return was a pretty good result!
I can share an experience, my late father had heard about Warren Buffett also, I forget the exact year , but, he had bought a few hundred shares of Berkshire at about 40 bucks a share, when it doubled, fairly quickly, he sold, and then waited for a price drop to buy again….! And he never owned Berkshire again.
My Dad did something similar. He invested $2,500 in Berkshire early on, but could not sleep at night and sold. Later he stuck with Enron and… But overall he did well and my parents left my brother and me enough that I was able to pay college expenses for my three daughters who graduated high school in four years. And he taught us the importance of investing, maxing out 401k and IRA limits year after year. Nobody bats 1.000 in the market.