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Gardeners Needed

William Housley

“SOME PEOPLE automatically sell the ‘winners’—stocks that go up—and hold on to their ‘losers’—stocks that go down—which is about as sensible as pulling out the flowers and watering the weeds,” argued Peter Lynch in his 1989 book One Up on Wall Street.

My father worked for Sears for 30 years, delivering washers, freezers and other appliances. Sears rewarded employees with stock, even delivery men like my dad. Over time, through splits and spin-offs, he acquired shares of Allstate, Discover, Dean Witter and Morgan Stanley. These shares supported my parents through their retirement and became my inheritance.

My father passed away in 2008, leaving me and my siblings shares in everything that was Sears. This was my first exposure to stocks and the financial markets. At age 53, I was oblivious to investment matters. My life was working for a nonprofit youth organization. Stocks and investing simply weren’t part of my world.

Spurred on by the fear of having almost nothing for retirement, I started studying investing. As part of this learning process, I often talked to others to see what they knew. Most were just as ignorant. Sadly, five of my colleagues—who had also inherited some wealth—had the misfortune of meeting and trusting unscrupulous financial advisors. These slick advisors kindly proceeded to help my friends lose their inheritance.

Based on these sad stories, I was determined to avoid a similar fate. I embarked on a journey to study and learn about investing, declaring to myself, “I might lose, but I won’t let anyone steal from me.”

Initially, my hubris exceeded my knowledge. I read about value investing. It seemed like a good idea and, with the best of intentions, I bought some undervalued companies. What could possibly go wrong? That’s when I learned the hard way about catching falling knives.

“No problem,” I thought, “how much lower can the price go? It must be at its bottom.” Oh my, I found out. Ouch.

But as for my inherited Sears shares, could there be a more stable company? I read some place that someone said that their favorite holding period is forever.

Established in 1893, Sears grew, becoming a household name across generations. Its expansive catalog offered everything from cutlery to complete home kits. In 1997, reaching its pinnacle, Sears held the 15th position in the S&P 500.

In 2018, just 21 years later, Sears declared bankruptcy. During the company’s years of decline, the S&P 500 thrived. Between 1997 and 2018, the S&P 500-index climbed from around 970 to 2500, an impressive increase of roughly 160%, excluding dividends.

At the start of that 21-year stretch, Amazon entered the S&P 500 in 300th place. By 2018, it was in fourth place. Among the top 10 companies in 2000, only one of them—Microsoft—is still there in 2024.

Looking into the shiniest crystal ball, we can’t know what the top 10 companies will be two decades from now, but don’t worry. The good news: We can buy the top companies of the future if we buy an S&P 500-index fund today.

Why is it that, during the years that Sears inched its way to bankruptcy, the S&P 500 marched to a 160% gain? Many would say diversification. But maybe we should add another factor.

The S&P 500 index is in a continual process of rebalancing based on market capitalization. As one company fades, another emerges. The index automatically lightens up on its losers, while automatically investing more in the winners. It automatically performs the function that too many of us don’t have the nerve to do on our own—and that’s to pull the weeds and water the flowers.

William Housley lives in Parker, Colorado, and has worked with Youth for Christ for more than 47 years. There, he serves as a trustee on the 403(b) committee. In their work with Youth for Christ, Bill and his wife Gretchen, a registered nurse, have ministered to youth in California, Germany, Vermont and Colorado. Today, Bill continues to contribute to the organization as “legacy staff.” He and his wife love spending time with their three grandsons.

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