The Secrets of Powerful Investing
Investing is putting your money instead of your muscle to work; yet, if there is any area of managing and making money that most people foul up, not just once, but over an entire lifetime, it is investing.
One of my personal fortunes was lost when I listened to the dubious advice of a financial salesman. At 26, after losing a million dollars in my recording studio fire, I decided to build my next fortune through investing. Genesco, the apparel conglomerate for which I designed computer software systems, offered a magnificent stock incentive plan to its management employees. My first 200 shares were bought for me by the company with another 200 shares on the payment-a-month plan. After I bought in at $21 per share, the stock began to split periodically and grow rapidly in value. Being close to management computer systems, I began to see loopholes that would legally allow me to get my hands on hundreds of shares of Genesco stock financed totally by the company. With two thousand shares of stock, for which I had paid nothing but a few monthly payments, I was accumulating tens of thousands of dollars in stock equity during the company’s most expansive era, and the stock skyrocketed to $70 per share.
I was hooked on the stock market. I thought I couldn’t lose. What a learning experience I was in for! Borrowing money on everything I owned, including my home and cars, I bought shares in all the new stock issues of the midsixties. Margin accounts and undercollateralized loans enabled me to run $60,000 of borrowed capital into a stock fortune of $800,000 in just three years. I even considered a leisurely, full-time career as an investor. Then the roof fell in. Every morning, the newspaper would show my newly found fortune dwindling at an ever-increasing rate. Every afternoon, I was in contact with the holders of my notes and margin accounts, who wanted instant replacement for their disappearing collateral. My margin calls seemed to have margin calls! Companies in which I had invested heavily, such as Performance Systems (Minnie Pearl Fried Chicken) and Continental Strategics, went bankrupt, leaving me only memories and worthless stock certificates. I was forced to trade my new custom-designed Cadillac for a three-year-old Volkswagen Beetle, rather than have the car repossessed for lack of payments. My home was finally sold with barely enough equity to pay back most of the borrowed money. The entire fortune was gone. I had tasted both the bitter and the sweet of investing and vowed that I would never again risk my money until I knew how to win without the risk of losing.
Tags: modern investing, Powerful Investing, The investment principles