Ward Cleaver wouldn’t be broke

There isn’t a day that goes by that people don’t ask me how they can make money in a market like this. And as of late, my new answer is: to invest in character. Have you ever stepped back and thought about the things you are investing in? Chances are that you are a stockholder in hundreds, if not thousands, of companies. You can’t name one employee of 99% of the companies that you invest in. You can (hopefully) read their balance sheets, you can understand their earnings, and you can listen to other people’s (analysts) opinions about the prudence of investing in said company. But do you really know what you are getting?

There was a time that you invested your hard earned money in businesses that you knew about. These were the ‘Beaver Cleaver’ days when Ward would invest $500 into Lumpy’s father’s manufacturing business. Ward knew Lumpy’s father, and could vouch for his character and business acumen. This obviously didn’t mitigate all the risk, but it certainly did limit some risk exposure.

I’m not suggesting that you pull your money out of the market and only invest in businesses of the people you know, although that would certainly be an interesting way to enhance the community in which you live. But I am suggesting that the continuing globalization and expansion of the investment world will lead to further unjustified befuddlement as investors lose money by investing in faceless companies. Should you really be that surprised, shocked, and angered if you lose money investing in companies that you truly aren’t familiar with? Long ago numbers trumped character in the investment world, but the chronology of this event shouldn’t attenuate the sadness of it.

I’ve seen many investors ‘go down swinging’ by juggling portfolios of companies that they are factually unfamiliar with. Why not ‘go down swinging’ with companies that you can truly believe in? Do we put up artificial barriers of anonymity in order to lessen the impact of potential loss? It is starting to seem that way. We should begin to trust our own judgment in people when investing with companies. That is much different than trusting the investment advisor that you invest with. They don’t know the companies any better than you do. They know the numbers. And the numbers just changed the investment world forever. And if the numbers haven’t changed the investment world forever, then none of us have learned our lesson.

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