Danger, Danger
Too many first time investors / traders read a few books and, having absorbed the authors’ wisdom, launch themselves (and their savings) into market activity. They then learn that there’s no substitute for losing money in the markets to complete a stock market education. Some – like the investor this post is about – then wish they had committed less money to their initial foray.
I found this investor while I was looking at reviews of Phil Fisher’s book – Common Stocks and Uncommon Profits – on Amazon.com. In 1998 the investor announces that, having read Mr. Fisher’s book, he has decided to invest all of his money!!! in Coca-Cola. Here’s what he says:
Phillip Fisher is the father of qualitative analysis. This book changed my life like no other. It has made me settle down as an investor and think as a businessman, and put all notions of trading aside. From reading Fisher, I now understand that one should only invest in a small number of stocks, but these stocks must be perfect in all aspects. He shows one what signs to look for in a company and how to analyze it. From reading Mr. Fisher’s book I have put all my money in Coca-Cola, and have been well rewarded. Mr. Warren Buffett who read this book in the 1960’s found it to be one of the best investment books ever written. I myself consider it my family bible. Life as an investor was pure hell until I read this book, and after reading it I feel that nothing can stop me from becoming very wealthy. All I have to do is follow the steps that are in this book. Thank You Mr. Fisher.
Here’s Coca-Cola’s stock price chart since 1997 (with all of the reviewer’s money invested in it!):
Coca-Cola (KO) chart 1997 to 2007
Result:
If he has stuck doggedly with his original strategy, our intrepid investor will have spent nine fruitless years in Coca-Cola. I sincerely hope he got out soon after his review and invested his money more profitably elsewhere.
Putting too many eggs in one basket after reading a book or two is not smart. Occasionally you might get lucky but I’d strongly advise market newcomers against being too bold. Edge your way into the markets carefully. Give yourself time to learn while putting a little of your money on the line. You learn faster and better when your money’s in the market than when you’re just reading books.
A Pivotal Point – Get Ready to Buy Coca-Cola?
Interestingly, Coca-Cola has been in an uptrend since the beginning of 2006. It’s now approaching a pivotal point. Jesse Livermore, if he were alive, would be watching this one carefully.