Investing Tip:

Lessons From My Father

My father came to the United States in the late 1930's from Germany. He served in the South Pacific in World War II and raised six children while working his way up to the position of president at a bank here in Southern California. He's a pretty sharp guy, and I thought on Father's Day it might be appropriate to share a few investment related pearls of wisdom he imparted to me over the years. His stories about the firm Smith, Brown, Jones and Finster we'll leave for another day.

  • A company has to make money to be a viable investment. As he often said tongue in cheek "We're losing money on every sale but we're making it up in volume". It's that delusion that led to the whole internet craze and crash. It's one he warned about many years ago.

  • Make sure you're getting the straight story. Sometimes I'd tell him about some great deal because so and so said it was. He'd ask "How do you know they are telling you the truth?". Asking that one question would have kept an investor out of Enron.

  • Go where the opportunities are. My father has always been creative when it comes to opportunities. When I was in high school wondering about how to meet girls, he suggested taking a stenography class. He said "Who cares if you fail the class as long as you meet some girls?". In investing (and dating for that matter) it makes sense to look for potential investments where the pickings are ripe and the competition is light (how many other guys were taking stenography?).

  • Be prepared for opportunity. My Dad was always looking around for opportunities, and being ready when those opportunities presented themselves. One day my father asked me for some business cards and I didn't have any with me. He told me "A business man without a business card is like a carpenter without a hammer". How can you take advantage of a situation if you're not ready? You need to have already done your research and have cash in hand if you're going to make an investment at the right time.

My father got me interested in the stock market by giving me a copy of Louis Engels' "How To Buy Stocks" when I was 11. So he's directly responsible for my tips, which I hope you're finding useful. Thanks Dad, from all of us.

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Donald Steinmann and Advanced Financial Management assume no responsibility for any actions taken due to comments made in The Investment Tip of The Week.

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"A good decision is based on knowledge and not on numbers."
-- Plato