The “fear of missing out”, stems from the comparisons we make- or what you could maybe call “keeping up with the Joneses”. I wish I had that car, those stock returns, that family, job, vacation, bank account, etc. This focus often leads to discontentment. I would be happier if I had X or Y... so we then covet- or simply put, develop a jealousy, that goes nowhere fast.
Over the summer, my family had a chance to embark on a treehouse building project with three generations of my family. Somewhere between my son watching Treehouse Masters (thank you Pete Nelson)… expecting to have indoor plumbing and a ceiling fan and my concept of one sheet of plywood with a single 2x4 rail to keep my kids from falling off, we came up with…
There are a few things very important in building something of value. First, you need to have somebody with deep experience and knowledge, the grandpa or "pop-pop" in this situation. And secondly, the foundation is key to the success of everything you build. As you can see this foundation is solid, we hope the treehouse will last for decades.
When you consider building your family's future finances, here are the questions you need to ask yourself about that foundation:
The team at Foley and Foley Wealth Strategies is always happy to assist you in answering these questions and providing solutions to benefit your family.
This is so you CAN BE CONFIDENT on your financial foundation.
Luke Fields, CFP®
Any opinions are those of Luke Fields and not necessarily those of Raymond James. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, Certified Financial Planner™ and CFP® in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
I have competed athletically my whole life, so I was confident that coaching kids would be a simple endeavor. Wrong. I quickly learned there is much more to being a coach than a player. There is no shortage of what I have learned about myself and my players. Now after specifically coaching my daughter’s team for 4 years I truly love it.
First, I get to spend time with my daughter and get to know her friends! Coaches played important roles in my life and I love that I can build into their lives today and for the future. My legacy in their lives is happening now and also later.
Second, it forced me to learn and get better. I didn’t know how to coach well, so I had to get some formal training from US Soccer. Now coaching kids makes a lot more sense and I continue to learn more each training session and match.
Third, coaching is direct and honest, which I enjoy. Even a tough conversation is focused to be helpful. My players trust me in that I have their best interests at heart. And I trust that they will listen.
Lastly, the focus is on longer term. The ability to win a game today at the expense of correct strategy and skills is not worth it. My goal is to develop each player to reach their potential, be the best they can be.
This discussion made me realize it really does compare well to my career. Financial planning and advising correctly are just like coaching. Both require passion, education, planning, direct conversations, trust and a long-term outlook.
It is a blessing to work with the families that I choose to advise or “coach”. They trust me as their go to guy. I get to know their families, hear their story- successes and failures, share in their dreams and discuss the possibilities that are ahead, God willing. I am passionate about this.
Education along with real life experience provides something powerful. Competence in what I know, the capabilities of my team and myself and sometimes more importantly, the limits of my expertise… and knowing the need to bring in the correct fellow “coach”, be it a CPA, Estate attorney, Charitable/trust advisor, etc.
Is your advisor passionate in their career, to learn about your life and see you succeed?
Are your advisors educated, experienced and practical in their approaches? Are they continuing to learn?
Does your advisor speak the language you understand and is willing to have that direct, honest conversation you may need (…not just what you want to hear)?
Do you have a long-term financial plan to help you be the best you can be and reach your goals?
To Your Financial Life Plan,
Luke Fields, CFP®
Any opinions are those of Luke Fields and not necessarily those of Raymond James. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, Certified Financial Planner™ and CFP® in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
“What are your goals?” Throughout your life, you have been asked this question; at the start of a school year, on New Year’s Eve, the launch of a new job and of course by your financial advisor. I appreciate goals and the motivation behind them. We do need goals, they provide some direction. But can goals actually limit us?
Goals are absolutely important but issues can arise with them.
“Keeping up with the Joneses“ Goals that others have or we feel everyone should have as basic goals are not individualized. For example, most people do want to be successful, take care of their family and retire someday.
“How do you eat an elephant?” Goals can also be overwhelming to tackle because they are often long term journeys, maybe decades, thus often avoided all together.
“What if we don’t make it?” Goals can be stressful because what if you don’t achieve them? Fear of failure can sell someone short by unintentionally settling on a safe goal that is easier to achieve.
Take a simple but relevant example of the traditional goal of being “retired” someday. Does the idea of retirement fixate us on the task (goal) or the real desired outcomes (hello all the possibilities)?
"What's money? A man is a success if he gets up in the morning and goes to bed at night and in between does what he wants to do."
-Bob Dylan
Goals do help us focus on tasks and move us in a general direction but can often miss the real desired outcome.
The truth is that most people don’t stop working in retirement, they just shift their work to choosing what they want to do versus having to, possibly start a 2nd career or volunteer their skills to their community.
This example has shifted my thinking on how to converse around goals and dreams. The question I ask now and you need to ask:
Possibilities open the mind to be more creative, dream big and think on the true desired outcome of what could be (not just the tasks to get there).
What you value, what has been laid on your heart and the things you find important will steer this exploration.
Our conversations need to consider the possibilities of big dreams, big thoughts and BIG RESULTS.
When I was in my early 20s, I remember being told by someone older… “you know, the older you get, the faster time goes by”. I admit thinking they were a little crazy, however I now fully agree with them since many years have passed. This year has been like “light-speed”.
Optimism is typically amplified as we celebrate Christmas and the holidays and we look to turn the calendar into a New Year. This year is no different; 2017 seems to be about change.
The year 2016 was a year of swings and surprises no less. 2016 had a poor investment start and outlook with the markets down nearly 11% by mid-Feb, only to swing up sharply to be even by mid-March (S&P 500), a month later. This dramatic move in the market not surprisingly coincided with oil’s rebound from its February low. Afterwards the markets positive momentum continued. Then there was June’s “Brexit” vote in the U.K. which was a surprise to the pundits and pollsters alike.
And of course the U.S. Presidential election was the biggest surprise of the year; the pollsters, the “wall street insiders” and even Vegas all got it wrong.
The expected change with a new administration concerns some and excites others. The market has shown its excitement based on Trump’s focus on two main campaign components;
1) a large infrastructure spending program estimated at $1 Trillion, which all agree is expensive but much needed for our country’s ailing bridges, roads and logistics (both Clinton and Trump proposed)
2) the likelihood of tax reform consisting of possible IRS simplification, personal tax bracket reductions and the most heralded- corporate tax cuts from 35% to 15%.
We won’t try to predict the market or events to come in 2017, since no one really knows but we can say it will be another year of change (as every year is).
It is essential to realize though, that change requires an intentional, planned out approach to your family’s goals, financial plan and resulting investment strategy. Foley and Foley Wealth Strategies delivers just this with an adaptive and clear approach through the uncertainty any year can bring. Reach out and let us assist your family.
Are you a Control Freak? Focus on what matters.
Volatility in the Market, what is that? It is not a bad word.
The Problem with Legacy. Why it starts today and not when you die.
Staying Safe Online (9 ways)
And Finally... We are still celebrating 35 years of serving our clients!!
To a well-planned 2017!
Luke Fields, CFP®
The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Inclusion of these indexes is for illustrative purposes only. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Past performance does not guarantee future results. Any opinions are those of Luke Fields and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice.
In 1981, Foley and Foley was established when insurance specialist Mark Foley and his investment savvy son, Kevin Foley joined forces to serve clients.
Today, Foley & Foley Wealth Strategies is thriving thanks to the continued dedication and success of Kevin Foley and his family of partners, Luke Fields and John Foley. Kevin shares that “we’ve worked to maintain the exceptional standards established early in the company.” Click here to read more about ‘Our Story’.
The firm credits success to their clients trust and satisfaction. By building a financial plan unique to each client, Foley & Foley Wealth Strategies conveys that real wealth comes from planning and living your best life, and being able to pass on the blessings.
Since 1981, Kevin Foley, ChFC®, CLU®, has specialized in helping clients accumulate, manage and preserve wealth and been recognized as an outstanding financial advisor, achieving membership in the Raymond James Leaders Council.
Luke Fields is a CERTIFIED FINANCIAL PLANNER™ Professional with a thorough understanding of the details required when constructing strategies for clients. John Foley, RJFS Investment Consultant, specializes in consulting with clients to determine which investments will help them accomplish their unique goals.
In recent years, Foley & Foley Wealth Strategies has modernized our firm processes, created a new logo/website www.foleywealthstrategies.com, enhanced the investment selection process to be discretion managed in-house and implemented the most current financial planning software adding significantly to their investment and financial planning strategies. These changes convey a readiness, vibrancy and current understanding of today’s challenging markets.
Foley & Foley Wealth Strategies THANKS YOU! We pledge to you our continued best service – you deserve it!
Kevin Foley ChFC®, CLU®, Founding Partner
Luke Fields CFP®, Firm Partner
John Foley, Firm Partner, Investment Consultant, RJFS
Elections have a way of revealing the true state of American politics. I think many have known it was in a sad, poor state but we didn’t have a concrete point in time to say, yep this is really bad. Until now. Currently, we find ourselves asking, “are these the best candidates we can offer?”
It is the first election when more than 50% of voters are voting “against the other candidate” rather than for the one they will actually “pull the lever” (Pew Research).
How Elections Impact the Stock Market
In looking at history here is what we know.
Volatility in the stock market always increases heading into and exiting a presidential election. We know that the stock market hates uncertainty, and uncertainty is exactly what you get in a polarizing election that has very different candidate policies. Volatility is normal in the stock market but is heightened when emotions, worry and policy concerns influence trading. While it is normal to be concerned, it is not wise to make drastic changes to your financial plan.
12 months after an Election the markets are usually not impacted. There is an old saying that “the market always climbs a wall of worry”. Although there are no guarantees longer term, it is impressive looking at this chart of the many various worries and concerns that the market has climbed.
The market likes political “grid-lock”, and it is likely to be so after this election.
“Grid-lock” between the Executive and Legislative offices- Congress/House provides some certainty on likely policies and helps prevent dramatic policy swings. Large policy shifts or swings would occur without grid-lock, actually causing more uncertainty in that current political cycle and then also in the following election cycle as the Pendulum historically looks to sweep to the opposite side of the spectrum.
Business and citizen spending has the greatest impact on the economy.
In the United States, 82.4% of GDP comes from sources other than the government. The president doesn’t have to be popular or have a high approval rating for a healthy stock market. Historically, the market has performed well when approval is in the 35-50% range.
Making a move to Cash is “Timing the Market”. Study after study has shown that trying to time the market is a futile exercise and missing just a few of the best days in the market can dramatically impact your long term returns. Refer to the chart above where the market climbs a wall of worry and this one below.
A long term financial plan is your best bet.
Whether it is worry over an election causing increased market swings or clear goals you want to accomplish financially… either way it is best to stick to your financial plan. Focus on the things you can control inside of your plan such as your goals you have set for yourself, your personal spending, how much you regularly save and the risk you are comfortable with in your portfolio.
To the Freedom to Vote For…or Against,
Luke Fields, CFP®
Any opinions are those of Luke Fields and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Past performance may not be indicative of future results. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that any statements, opinions or forecasts provided herein will prove to be correct.
Previously, we discussed how to build credit when you have no credit history. This discussion, is all about how to improve your credit score.
What’s my Score? How do I improve it?
First, it is important to understand how your credit score is calculated. A FICO (Fair Isaac Corp) score is a number on a range from 300 to 850, with a higher number indicating lower risk to potential lenders. Realize though that each lender and their underwriters will view your history different from one another. You can obtain a free credit report and score by visiting AnnualCreditReport.com.
Second, your FICO score is composed of 5 major components and here are some thoughts on how to improve your number. Increasing your credit score will provide you the best terms and lowest interest rates for when you buy a home, car or seek a personal loan.
Payment History 35% Maybe you have missed a payment in the past or been late. Make sure you pay past due debts first, followed by paying current owed. A collections situation, even if paid off, will stay on your history for 7 years. Moving ahead, pay all of your bills on time. Possibly consider setting up payment reminders or automatic payment options.
Amounts Owed 30% Pay off and reduce debts you owe. This is huge for life and financial success well above your FICO score. It is also good to realize that the total amount of available credit currently offered to you- if high, can be a negative on your score even if you are not using it. And if you are carrying a balance and have a high utilization % rate, that will ding your score as well. While reducing debt will help improve your score, the bigger payoff is improving your financial situation and the lasting reward of freedom from debt.
Length of Credit History 15% It takes time to build and show a consistent, responsible use of credit. Don’t cancel credit cards with long history. As well, look for errors on your credit report. Fixing an error will lead to an improved score.
Types of Credit Used 10% A mix of credit cards being paid each month and loans (installments) can show responsible handling of debt.
New Credit Opened 10% Apply for new credit as needed and don’t overdo it. In this thought, also don’t apply for several new cards within a short time frame.
Ask for help. Openly talk with your creditors. They want to be paid back, so they will work with you. Seek wise council- ask someone who has had good credit for many years for advice and/or seek professional guidance as needed. Develop a plan of action and be persistent working towards your goal. Debt can be a useful tool but it has to be understood how it works and used correctly.
To Improved Credit Scores,
Luke Fields, CFP®
Whether you realize it or not, you are imprinting. What is imprinting?
I was speaking with our puppy’s dog trainer a while back and he said this: “Imprinting is really impactful. It is the memory, trust and familiarity your dog will have of you… forever.” At the surface, it made sense in terms of wanting our new family member, “Ollie” to listen to us, trust us, know our voices, remember our scent and be okay with us touching his paws (a big benefit for future nail-clipping :).
In my last writing, I talked about Legacy and the importance of realizing that its impact is happening now, today… not later, “down the road” when you die. I instantly made the connection. There is much more to how a Legacy gets created. It is not just “leaving” a legacy, it is “imprinting” a legacy.
It is Not Just for Dogs
Every day we imprint ourselves on those around us; a spouse, children, friends and co-workers. Wow. Memories of me are being imprinted on those around me, possibly forever. Have you ever heard the often used expression “more is caught than taught”? Imprinting can be verbal but often it is what we don’t say; our actions both good and not so good. I know my kids learn a lot by watching how I handle money, talk with others and how I spend my time. In what I say and do, I want to teach them not only good financial habits but a deep love for God, respect of others and foster a heart of service.
Be Intentional
Imprinting your Legacy goes beyond the important financial habits and decisions we all face. It includes all of life’s possible behaviors and emotions. So as your legacy is being created now, your imprinting on others needs to be intentional. Develop a purposeful plan to imprint and leave the legacy you desire. This is part of the goal discussion when we create a financial life plan for clients.
Imprinting a Legacy,
Luke Fields, CFP®
Any opinions are those of Luke Fields and not necessarily those of Raymond James. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, Certified Financial Planner™ and CFP® in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.
I met with a great couple the other day. As we chatted, I asked if they had a financial plan- “ah yes, we think we do….” was their answer, so that means no. We discussed some additional items and it became even more clear that their investments, insurance and current advisor were not coordinated and planned out well. I see this again and again with many prospective clients regardless of their age and their net worth. It is a common problem and it frustrates me. This is not their fault and I don’t blame them one bit. After all, how are they to know? It is one thing if a person knows that they have “some investments” that a stock broker, registered representative or insurance agent placed them into (or worse yet, sold them). Their expectations are correct that it is simply an investment relationship. However, it’s another thing if people believe they are getting more service, like a “financial plan”. In reality they are majorly under-served while likely overpaying and worst yet headed down a dangerous path. Let me explain.
Financial planning is NOT a 1x event. A financial plan is a living, breathing plan that updates with the twists of life and the many different stages you encounter. It is an ongoing process. It is online and readily available to review.
Financial planning is NOT a product, investment or stock that you buy. These should be seen as the potential vehicles for your unique situation (if appropriate) to make your plan work correctly, not the miracle cure (since the “last thing we tried didn’t work”).
Financial planning is NOT a vague ideal or attitude such as, “save as much as you can and we will figure out what you can do down the road.” Sadly, I have heard of other so called “advisors” saying things like that. Here is the truth… financial planning is rooted in your goals and what is truly important to you!
Financial planning is NOT a huge stack of papers that lists of 15 things to immediately do (mostly on your own). Good planning is accomplished in a modular method, one manageable step (or two) at a time. This is realistic.
Financial planning is NOT a quick or easy strategy. It takes expert advice, patience and good habits over time to reach success. You need a qualified and competent advisor to help you realize your goals.
Remember a good and useful financial plan starts with what you value. What you value should naturally direct your goals. And your goals then dictate what investment, insurance, tax, estate methods we use to help you achieve success in your plan.
To your Financial Plan,
Luke Fields, CFP®
Any opinions are those of Luke Fields and not necessarily those of RJFS or Raymond James. Expressions of opinion area as of this date and are subject to change without notice.
Sketches are courtesy of BehaviorGap
I love roller coasters. Always have and hope I always will because the big kid in me comes out. Each summer, I enjoy introducing my children to new and bigger rides, although I have learned to make sure they are ready before buckling them in. But that’s another story.
Day to day the global stock markets will swing, sometimes suddenly like a roller coaster. This movement is often referred to as “volatility.” Possibly, volatility is not the best word to use..? Over the long term, day-to-day market swings are insignificant. We at Foley and Foley Wealth Strategies would like to challenge you to reconsider the word “volatility” and how it makes you feel when thinking about your investments. We know it is your hard earned money and we want to help you gain perspective to see opportunities.
I have asked John Foley, our Investment Consultant here at Foley and Foley Wealth Strategies to share a story and his thoughts on volatility.
By John Foley
Changing the way one thinks about money and investing is very difficult; but sometimes breaking it down topic by topic may help some people. In what follows, I will briefly muse on the topic of volatility. I will share the intrinsic problem with the word when it comes to money, the correct way to view volatility in the context of wealth and then a story of a man who exemplified investing virtue through volatility.
When I was thinking about the word volatility, I tried to think of contexts outside of investing where volatility is a good thing. I wanted to make a parallel between that context and financial volatility. However, this task proved to be more difficult than originally expected. I thought of a volatile friend… that example doesn’t work. How about a volatile chemical? That would be one that explodes. BOOM![1] The first two things that came to my mind when I thought about volatility, outside the context of finance, were bad.
Not only does the word volatile seem bad, there also seems to be a violent nature to the word. Very few people would describe a stock market that moves rapidly up as volatile, even though that is technically volatility. Even fewer people would describe a person who is happy and often gets freakishly happier as volatile. You might call them a spaz or crazy with a smile on your face. But you would not call them volatile. The market has to move down before the news will call it volatile. A person must get angry or depressed for us to categorize them as volatile. It is not good for people to naturally associate a violent word such as volatility with apart of our lives that is as emotional as our wealth or savings. Therefore we should do away with this idea of volatility within capital markets; instead lets’ think of price movements as opportunities to buy items on sale.
Anyone who knows me, knows I enjoy scotch (except for in ‘dry January’). Now, as much as I hate to admit it, scotch is not a necessity. Scotch is a luxury. Furthermore, at the beginning of every year my wife and I anticipate all of our expenses for the whole year. We know that we will spend ~$6,000 on groceries. We will spend about the same eating at restaurants. Fearing judgement, I will reframe from sharing my 2016 scotch budget. But, believe me, my wife and I already know what it is. Having this annual budget in mind in addition to a predetermined value that I am willing to pay for a given bottle of scotch, gives me an upper hand when trying to get the most, quality scotch for my dollar.
With this mentality I welcome downward fluctuations in scotch prices. In fact, one can imagine my delight last year when I saw a bottle of scotch in Germany for half of what it was here in the US. The only fluctuations that are not welcomed, are ones that move the price of my beloved scotch higher. I believe most consumers would share my scotch sentiments about price fluctuations with any item they want to consume…except stocks.
If I were to ask any other scotch drinker if they would prefer scotch prices to be higher or lower one year from now I would unequivocally hear, lower. If I were to ask someone who enjoys eating meat if they would prefer the price of filet to increase or decrease over the next year, I believe they would echo the sentiments of the scotch drinker. However, if I were to ask the common equity investor if they would prefer their stocks to be higher or lower one year from now, most would say higher. So let’s recap. We like buying scotch and we want the price to go down so we can buy more. We like buying steak and we want the price to go down so we can buy more. We like buying stocks but we want the price to go… up so we can buy less?
Okay, maybe I am missing something. Maybe I am making a bad parallel. I got it! Let’s say I want to buy a franchise. To make it concrete, let’s say I want to buy the Dairy Queen in Worthington. The one on high street (because their fudge stuffed cookie à la mode is heavenly). However in this scenario I cannot buy the Dairy Queen right now, but I can buy it a year from now. In this case I would want the price of that Dairy Queen to go up over the next year. This way I could pay more for it. Wait… that’s not right. I would want it to go down. Shoot! That didn’t work. I got it now. What if I already owned half of the Dairy Queen on high street and I wanted to buy the other half next year. Then I would want the price of the Dairy Queen to go up over the next year! Right? Wait, that doesn’t work either.
Okay, so when I am buying, I want the price of scotch, steak or a business, such as DQ, to drop over the next year. Nevertheless, I want my stocks to go up. Why is this? Why do most people want all the items that they consume to go down in price except for stocks? It is because for most people stocks don’t represent a share in a real business they represent wealth. When someone says they would like to buy a DQ franchise, they want it to drop in price over the next year because they understand that it is a business. Successful business owners want to get a business for the best price possible and therefore would like to pay the current owner less than he or she believes it to be worth. But that same person could buy Google stock and want it to go up even though they fully expect to buy more. In this case, Google doesn’t represent ownership in a business that our make-believe friend would like to buy more of. It represents how wealthy our friend is. And for most people, how wealthy one is represents their self-worth (for more on that please see your priest, pastor, rabbi, iman or guru).
If one could stop thinking about stocks and bonds as representations of wealth and think of them as representations of ownership in a business, then one would no longer see market downturns as volatility but as opportunities to buy more. John Train and the hog farmer Mr. Womack offer a great example of correct thinking about investments. Let me share…
* * * * * * * *
Right after John Train was discharged from the Army, at the close of World War II he went into the drilling-rig building business. On the side (and at first as a hobby) he began buying and selling stocks. At the end of each year John always had a net loss. He tried every approach he would read or hear about: technical, fundamental and combinations of all these… but somehow John always ended up with a loss.
It may sound impossible that even a blind man would have lost money in the rally of 1958 – but John did. In his in-and out trading and ‘smart switches’ John lost a lot of money. But one day in 1961 John found himself in the Merrill Lynch office in Houston. He was discouraged and frustrated, when a senior account executive, sitting at a front desk, observed the frown on his face. He had seen this frown for many years so he motioned John over to his desk.
"Would you like to see a man", he asked wearily, "who has never lost money in the stock market?"
The broker looked up at him, waiting.
"Never had a loss?" John stammered.
"Never had a loss on balance", the broker drawled, "and I have handled his account for nearly 40 years." Then the broker gestured to a hulking man dressed in overalls who was sitting among the crowd of tape watchers.
"If you want to meet him, you'd better hurry", the broker advised John. "He only comes in here once every few years except when he's buying. He always hangs around a few minutes to gawk at the tape. He's a rice farmer and hog raiser down in Baytown."
John worked his way through the crowd to find a seat by the stranger in overalls. John introduced himself. He talked about rice farming and duck hunting for a while (John was an avid duck hunter) and gradually worked the subject around to stocks.
The stranger, to John’s surprise, was happy to talk about stocks. He pulled a sheet of paper from his pocket with his list of stocks scrawled in pencil on it that he had just finished selling, and let John look at it. He couldn't believe his eyes! The man had made over 50% long-term capital-gain profits on the whole group. One stock in the group of 30 stocks had gone bankrupt, but others had gone up 100%, 200% and even 500%. The rice farmer explained his technique, which was ultimate in simplicity. When, during a bear market, he would read in the papers that the market was down to new lows, and the experts were predicting that it was sure to drop more, the farmer would look through a Standard & Poor's Stock Guide and select around 30 stocks that had fallen in price – solid, profitmaking, unheard-of, little companies (pecan growers, home furnishings, etc.) and paid dividends. He would come to Houston and buy a $25,000 package of them. And then, one, two, three or four years later, when the stock market was bubbling and the prophets were talking about the Dow hitting 1500, he would come to town and sell his whole package. It was as simple as that.
During the subsequent years as John Train cultivated Mr. Womack (and hunted ducks on his rice fields) until his death, John Train learned much of his investing philosophy. He equated buying stocks with buying a truckload of pigs. The lower he could buy the pigs, when the pork market was depressed, the more profit he would make when the next seller's market would come along. He claimed that he would rather buy stocks under such conditions than pigs because pigs did not pay a dividend. You must feed pigs.
He took a "farming" approach to the stock market in general. In rice farming, there is a planting season and a harvest season; in his stock purchases and sales he strictly observed the seasons. Mr. Womack never seemed to buy a stock at its bottom or sell it at its top. He seemed happy to buy or sell in the bottom or top range of its fluctuations. He had no regard whatsoever for the old cliché – Never Send Good Money After Bad – when he was buying. For example, when the bottom fell out of the bottom in the market of 1970, he added another $25,000 to his previous bargain-price positions and made a virtual killing on the whole package.
John Train supposed that a stock market technician could have found a lot of alphas, betas, contrary opinions and other theories in Mr. Womack's simple approach to buying and selling stocks. But none that John knew put the emphasis on "buy price" that Mr. Womack did. John realized that many things determined if a stock is a wise purchase. But John had learned that during a depressed stock market, if you can get a cost position in a stock's bottom price range it will forgive a multitude of misjudgments later.
John also learned that during a market rise, you can sell too soon and make a profit, or sell on the way down and still make a profit. He would say, “With so many profit probabilities in your favour, the best cost price possible is worth waiting for.” John knew this was always comforting during a depressed market, when your friends would look at you with alarm after you buy when they were selling.
In sum, Mr. Womack didn't make anything complicated out of the stock market. He taught us that you can't be buying stocks every day, week or month of the year and make a profit, any more than you could plant rice every day, week or month and make a crop. John changed his investing lifestyle and has made a profit ever since.[2]
* * * * * * *
Mr. Womack and John didn’t let words like volatility scare them away from owning good, dividend paying businesses. They thought of buying stocks in the same way they thought about pig farming and they were successful investors. I, and everyone here at Foley & Foley, would encourage you to follow in their footsteps. Tell people that you welcome price fluctuation because you are excited to buy businesses cheaper than you could previously. Disregard people that talk about volatility in the markets, as they are implicitly giving a negative connotation when assets go on sale.
Luke Fields, CFP®
[1] A more educated notion of volatility in chemistry has to do with a compounds’ ability to go from a solid to vapor without becoming liquid. I am using a colloquial understanding of a volatile chemical.
[2] Narrative taken from Ellis, Charles D., and James R. Vertin. The Investor's Anthology: Original Ideas from the Industry's Greatest Minds. New York: J. Wiley, 1997. Print.
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