Debbie’s Brother was Trustworthy, But …
By Ray Mullaney
Originally published in Senior Digest
A few months after her 67th birthday, Debbie retired after 30 years in the accounting department of a large bank. One of three children raised by Depression-era parents, Debbie, like her two brothers, was very good with numbers. Bert, her older brother was a wizard with numbers and became a very successful financial adviser on Wall Street. Debbie married young and had three children. Her husband Ed made a good living, but when her children were old enough, she returned to work.
Sadly, Debbie’s husband, Ed, died shortly before Debbie’s retirement. At the time of his death, she and Ed had saved $488,659 in CDs and government bonds. Their three children, grown and now parents themselves, were also doing pretty well.
Debbie felt all set financially; she felt no need to risk her security for “more” money. Debbie trusted and respected Bert. But Debbie and Ed had done pretty well, always safely investing in CDs and government bonds.
For years, Bert had explained to Debbie how much better off she would be investing in stocks. At the end of 1999, after the holidays, Bert and Debbie sat down for a serious meeting. Bert showed her exactly how much better off she would have been if she just invested some of her money in the largest and “safest” companies in America. He showed her how they performed over that past five years. Bert was, in fact, completely honest. He told her what he believed was true. He said, “there would be bad years, but that “Blue Chip” stocks were safe and after the bad years, long-term investors always did well.”
At their meeting, Bert showed Debbie how well stocks had done. The “facts” he showed her were very compelling and she was sold. Unfortunately for Debbie (and all investors), those were not all the facts (which I will discuss in a bit). In the 5 years prior to January 2000, here are the gains investors would have seen in these Blue-Chip stocks: