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GROWING RICH WITH GROWTH STOCKS<br />
to 100 percent. We have a very long-term approach to investing. I<br />
believe that over a decade, some of the investments I make will grow<br />
five to ten times what I paid for them. That’s the kind of goal I have.<br />
Given that, why would I want to be in bonds? I believe <strong>com</strong>mon<br />
stocks will continue to outperform bonds. Thus, I want to be an<br />
owner of a business, not a creditor (bond holder), particularly when<br />
business investments (<strong>com</strong>mon stocks) are available at attractive<br />
prices. I believe the main issues are what stocks to buy and what price<br />
to pay, not whether investors should own stocks.”<br />
Yacktman sums up his philosophy on asset allocation (deciding<br />
how much of one’s investment dollars to put in various instruments)<br />
like this: “Pay off all of your debts first, including your credit cards<br />
and mortgage,” he suggests. “That will put you on a solid foundation,<br />
because they can’t take your house away. Then gradually put the rest<br />
of your money in stocks. This way you’ll be an owner, not a creditor,<br />
in life. That’s not to say you shouldn’t own stocks if you have a<br />
mortgage. You should. All of your tax-sheltered profit sharing, 401(k),<br />
IRA, and other investment accounts should still be in stocks. Aftertax<br />
savings dollars can also be put into stocks if you do it conservatively<br />
and are able to understand and accept the risks. The important<br />
thing to remember is that if you’ve already paid off your home, your<br />
overall risk is less.<br />
“The two questions one must ask when it <strong>com</strong>es to purchasing<br />
equities are, ‘What do I buy?’ and ‘What do I pay for it?’” Yacktman<br />
continues. “It’s not a matter of if you ought to own stocks. It’s only<br />
when you buy the wrong stocks or pay the wrong price that you can<br />
have bad results.” Yacktman eats his own cooking. He doesn’t have<br />
a mortgage, and his entire portfolio is invested in the stock market.<br />
“I think the idea that all older people should keep some of their money<br />
in bonds is malarkey,” he contends. “The key variable is the annual<br />
cash needs of the investor, not his or her age. Likewise, if someone<br />
just throws money into an index fund when the market is high, I<br />
think that person is taking an inordinately high level of risk. However,<br />
this is much different than looking at individual stocks and buying<br />
them at low prices. The alternative would be to invest in a lowervolatility<br />
mutual fund. The bottom line is that investing should be a<br />
logical process.”<br />
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