BI > JUNE 2003

Sayings of Seer Seger

Common Sense and Investment Wisdom

Known as Captain Blunt by some close to him, Ralph Seger takes great pride in his honest and direct appraisals of situations that confront him. Sometimes the truth hurts, but NAIC investors have come to count on Ralph's reliable reminders. This collection of Seger quips was compiled by NAIC member and volunteer Larry Warren.

On Investing and Common Sense

Investing is a lot like games such as tennis and golf. Avoid losing by avoiding the very difficult shot that is beyond your ability. Successful investors as well as players in other games of life typically have well-thought-out and consistent objectives.

An investor without investment objectives is like a traveler without a destination.

History is littered with individuals, nations, military leaders, politicians and investors who vacillated in their objectives.

As soon as the federal government gets involved, I'm afraid we can expect the cost-consciousness of the Pentagon, the efficiency of the Post Office, the compassion of the IRS and the cost to the taxpayers of the bailout of the savings and loan associations.

One way to end up with $1 million is to start with $2 million and use technical analysis.

The most important parts of any decision process are the facts.

On Stock Selection and Portfolio Management

The three most important things to consider about a stock are management, management and management.

Individual stocks develop their own P/E ratio characteristics based on quality, size, EPS growth and institutional ownership.

Portfolio management is an integral part of investing. It removes part of the uncertainty in managing a portfolio by being able to make decisions based on facts instead of emotion. The major factors to be considered when buying a stock and managing a portfolio are value; quality; diversification to minimize risk; past, present and future growth; management; and investment objectives. We can invest for high income or high growth, but not for "high both."

The quality of a security is too often overlooked by investors; good-quality stocks frequently possess characteristics that are lacking in lesser-quality stocks. Low-quality stocks are liable to present you with an unexpected blown head gasket. In the final analysis, it is rare that a good quality stock gets so overvalued it should be sold.

Sell if you made a mistake. Don't wait for the mistake to correct itself. Usually it won't.

When you pay $4 1/4 for a stock and it sinks to $1 1/2 during a booming bull market, it is a signal that something is dramatically wrong. (That "something" is probably you.)

The worst thing you can do is to stay with decisions in which thoughtful reflection shows an obvious mistake was made.

Remember, when the tide goes out, all the boats fall.

Trying to "get back to even" with the mistakes in your portfolio is an exercise in hope, daydreams and flights of fancy over reality.

Decisions based on emotions, seat-of-the-pants feelings or following the crowd may develop a few lucky breaks, but such haphazard operations are an invitation for disaster. You probably would have been better off buying a lottery ticket and not have to face up to paying a big commission to sell.

You can never predict when that unknown torpedo will come out of the dark and smash the price of a stock.

If you want a high rate of return -- and certainly attempting to double your money in five years falls in that category -- then you have to assume some risk. There is a place for slow-growing stocks paying above-market dividend yields in the portfolios of income-oriented investors. But these are not the stocks to consider when we are looking for 15-percent returns.

A few poor decisions do not spell financial disaster; indeed, they can be a valuable education. All it takes is some curiosity and energy on the part of an investor to uncover and interpret facts.

Thanks, Captain Blunt.

Mark Robertson is director of online resources and senior contributing editor for BetterInvesting. He serves as a member of BetterInvesting Magazine's Editorial Advisory & Securities Review Committee. Mark can be reached at Robertson_Mark@comcast.net.