By DAVID MOON, Moon Capital Management
Since your 2005 list of New Year's resolutions is likely no more sacrosanct
than say, your 2004 list, it's probably not too late to augment your collection
of impossible wishes. If you're open to suggestions, here are a few
personal investment promises you might consider.
This year, don't buy something just because your brother-in-law suggests
it. If you think he's a kook, why take investment advice from him?
Promise yourself to try and distinguish between the price of a stock and the
attractiveness of a business. Plenty of fine businesses are terrible
investments for a variety of reasons. And there is occasionally a poor
business that presents an attractive investment opportunity.
Resolve not to move your retirement money to whatever mutual fund choices or
investment styles performed best last year. This is a horrible way to
manage money; you are constantly buying assets at high prices.
This year, ask questions. Ask lots of them. There are no dumb
questions, only dumb investors. A lot of people in the investment industry
make a living off of dumb investors. Resolve to quit being one of
Read your account statements. I am shocked at the otherwise
intelligent, accomplished and organized people who don't open their investment
statements each month. Bad news doesn't go away when you quit reading
Promise to pay attention to taxes. Ignoring the tax consequences of
your investment decisions is stupid. If you feel you don't pay your fair
share of the federal tax burden, just send George an extra check on April
But don't let taxes be the sole determinant of your investment
decisions. It makes no sense to spend (or lose) $100 just to save $15 in
taxes. Look at the big picture.
Promise yourself to be skeptical of any company that repeatedly blames poor
results on the weather. If it's always too hot, too cold, too rainy, too
dry or the porridge just isn't quite right, pass on the stock.
For one year, try not to invest in things that seem too complicated for you
to understand. It is highly unlikely that you would consider an investment
in something that is really so complex that you can't intellectually grasp its
business and risks. But a salesman might try to make it appear that
way. If someone can't easily explain a business to your satisfactory
understanding, it is the salesman's problem, not yours.
Try not to get too excited or depressed at anything the Federal Reserve Board
does, or doesn't do, this year. The Fed increased interest rates five
times in 2004, yet the stock market increased, bond prices remained steady,
housing prices didn't collapse and the sky didn't fall. Promise you will
think long-term this year. 'Long-term' means years or decades, not
Pledge to save this year. Participate in your retirement plan.
Save the max. Let both your employer and the government help you build
Don't buy stock in a company if it earns less money than your dog.
Resolve not to get drunk at your company Christmas party and sing Italian
operas. This will do wonders for your career.
David Moon is president of Moon Capital Management, a
Knoxville-based investment management firm. This article
originally appeared in the News Sentinel (Knoxville, TN).