Master of prudent, long-term investment preaches eight rules to get rich

May 05, 1991|By Dick Marlowe | Dick Marlowe,Orlando Sentinel

Time and events are being compressed into flashes these days. Things are happening so fast that the mood of investors can change from euphoric to pessimistic during lunch. As my barber reminded me last week, the world managed to squeeze in a full-fledged war between haircuts.

Investor confidence is driven by a daily stream of current events in the 1990s, and the investing public is doing flip-flops trying to figure out which news is pertinent. But the past six months have provided us with a rare opportunity for a crash course in prudent investing, says H. Bradlee Perry, chairman of David L. Babson & Co. in Cambridge, Mass.

Although the headlines change every day, and the 6 o'clock news discards yesterday's top events like Pampers, Mr. Perry has come up with eight investing tips that he feels are as good in 1991 as they were in 1952, when he graduated from Harvard Business School.

Speaking before The Financial Analysts Society of Detroit last month, Mr. Perry offered these timely tips for those who may feel that their emotions cannot stand the constant barrage of good and bad news:

* "Market timing" fails more often than it succeeds.

* Unexpected events occur frequently.

* Investors' mood swings are often extreme.

* Interest rates are a powerful and often misleading influence on equity investors.

* Severe industry problems push down the price of a strong company's stock as well as a weak one's.

* When strong companies encounter specific problems, usually they overcome them.

* Any sensible investment strategy works well if you are patient.

* Long-term investors not only do well, but they also sleep well.

Although Mr. Perry thinks that those basic principles have remained true since he became involved with the stock market, he is also quick to admit that there are some dangers to modern investors that have not always been there.

Modern technology, rapid communications, program trading and the ability to instantaneously jump from equities to money-market funds and back again in the same week, said Mr. Perry, may be exciting, but they actually may be working against the best interest of some investors. In an action-oriented era, he explained, "those who want to be sophisticated and up-to-date feel that they have to follow those practices."

At 64, Mr. Perry said he has not strayed from his belief that "market timing was a delusion" and that sticking to sound, long-term investments is still the way to go -- despite all the strategies and speculations that have been brought into being by technological advances combined with hype and the daily rush of alarming news and sensational non-news. "The more bull and bear markets you live through," said Mr. Perry, "the more you believe in these rules. They are constantly being taught to us."

David L. Babson & Co., which does financial planning and counseling for individuals, institutional investors and corporations, not only recommends holding stock for the long-term, but also bonds. Those holding a well-diversified portfolio of intermediate-term bonds, noted Mr. Perry, "don't have to worry about guessing shifts in interest rates or agonize over big price swings in their holdings."

But Mr. Perry shied away from being labeled a conservative. "We tell people to be fully invested," said Mr. Perry. "Some people say it is risky. We say it is not."

The eight rules, he added, may not apply to everyone. You should heed them, he said, "only if your objective is to be a moneymaker."

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