Originally posted on November 2, 2020.
“Well, writing to you now, five decades later, from our outside kitchen/living space in the heart of Old Town, Key West, I can’t help but think how much water has gone under the bridge through the many decades,” wrote Dick Young to you in the June 2017 issue of Richard C. Young’s Intelligence Report. “But if you have been with me over the years, you are keenly aware that it is indeed the combination of dividends, compound interest, perspective and patience that frames the message I deliver to you month after month. I do not change course. You can count on it.”
My Decades with Wellington Management
Think of all I have learned and how much I know today that I did not know even a decade ago. In fact, my age today may be one of the greatest assets I offer you. After all, how many investment strategists can say they have 53 years of experience and go back to 1971 with Wellington Management (Wellesley, Wellington, GNMA) and Fidelity Investments? For decades, these have been my featured fund groups, and Fidelity is my management firm’s custodian.
Back to Monterey and Woodstock
I’ve been developing investment strategies for investors like you before The Association kicked off the 1967 Monterey International Pop Festival with “Along Comes Mary” or Richie Havens opened Woodstock in August 1969. I started soon after John F. Kennedy was shot in Dallas in November 1963, and even before Dr. Martin Luther King, Jr. was shot at the Lorraine Motel in Memphis in April 1968. That’s a long time ago. The ‘60s was of course a seminal decade in American history. Key events, including the difficult investment environment of the ‘60s, seem like yesterday.
My 1964 Beginning
I’ve put together a display that tracks the Dow Jones Industrial Average through the decades. When I entered the securities business in the summer of 1964 (with Ed Rosenberg, Clayton Securities), I had no way of knowing that during my complete career in the Boston investment community, which ended in 1981, the Dow would end lower than when I began. How would you have liked to have retired in 1964 and faced a 16-year Dow downer? Talk about retirement financial hell.
As my display indicates, the decade of the ‘60s provided a sad annual average return (ex-dividends) of only 1.65%. Moreover, the 1970s were set to be even worse. When the curtain came down on this miserable decade, investors had scored an average return of only 0.5% (before dividends). Thankfully for conservative investors today, as has been the case well before the ‘60s and ‘70s, dividends remain the name of the game.
Ben Graham’s Powerful Investment Advice
With my first reading of Security Analysis by Ben Graham in 1963, I climbed on the dividend bandwagon. Today, it’s still my most powerful investment influence. Ben was Mr. Dividends. I became attached to the concept before I landed at Clayton Securities at 147 Milk St. in Boston’s financial district. As early as 1964, I knew I would concentrate on dividends throughout my investment career.
Last week I told you that I received this message from a client:
EJ, it was great talking to you yesterday. While doing a little reading last night I came across a quote I thought you might like. The Old Testament book of Proverbs was compiled by King Solomon who many consider to be the wisest person ever. So I looked this up and I think Ben Graham and Warren Buffet and Dick Young are in good company, at least philosophically. The quote is from the book of Proverbs chapter 21 verse 5. “Steady plodding brings prosperity; hasty speculation brings poverty .“ Sounds like Solomon would have made a great financial adviser like the aforementioned men. Now I need a quote on how to handle a Pandemic and a contentious election and an anxious wife in a darkening Winter. I may not need Solomon just a little more Basil Hayden (bourbon). Take Care and Thanks.
In the September 2015 issue of Richard C. Young’s Intelligence Report, Dick Young wrote:
The Prudent Man Rule is based on common law stemming from the 1830 Massachusetts court formulation Harvard College v. Amory. The Prudent Man Rule directs trustees “to observe how men of prudence, discretion and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income, as well as the probable safety of the capital invested.”
Since I started our family investment management firm in 1989, I have operated under the assumption that the Prudent Man Rule to this day carries as much weight as it did in 1830. Common sense and prudence just don’t go out of style—ever.
Action Line: For time eternal, successful investors plod to everlasting prosperity while speculators have been condemned to poverty. You know which way you want to go. Allow us to show you how.
E.J. Smith - Your Survival Guy
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