Sunday, February 16, 1997

Own your share of America

By JOHN CUNNIFF / Associated Press

NEW YORK - There is no corner of Wall Street and Main Street in this financial capital, but such an intersection is not imaginary, and the traffic becomes heavier by the day.

Wall Street, in financial lore, is big money and wealthy investors, but a growing bundle of that money is in small amounts from small investors, from the folks you might say live on Main Street.

There are now more than 60 million of them, and you can read about their activities every day in the newspaper. Such as the news released last week that they poured $24 billion into stock mutual funds in January alone.

Less known are the individual stories. Of the investment club member who began investing $10 a month in 1940, raised it to $20 when he was in the Army, and continued doing so for 46 years. Total investment: $11,300.

With that he put two sons through college and graduate school, and helped them buy houses. He paid off his mortgage. He bought a boat. He and his wife traveled. He spent $147,000 doing this, but had $141,000 left for retirement.

He was a pioneer, among those who created the Mutual Investment Club of Detroit, which spawned the National Association of Investors Corp. (P.O. Box 220, Royal Oak, MI 48068), which now has 500,000 members in 27,914 clubs.

You can understand therefore why the NAIC helps promote the "Own Your Share of America" campaign. And why companies such as AT&T, McDonald's, Pepsico, Texaco and 200 other companies have signed up as sponsors.

And why Richard Grasso, chairman of the New York Stock Exchange, accepted the leadership of the 1997 campaign, and why the American Stock Exchange and Nasdaq and other financial institutions are eager to promote it.

The Main Street investor is now the big-money factor, even if it is mainly through participation in mutual funds and pensions funds. The former had net purchases of $230 billion last year. They own $1.8 trillion of stock.

The sad part of this story is it seems to reflect a lack of confidence among individuals. Direct investment in companies, vs. ownership via funds, has dropped sharply. In 1995, households sold $174 billion more they bought.

To these investors the NAIC message seems especially pertinent. With guidance and research materials, it believes individual direct investors can do as well as professionals. Year after year it demonstrates the point.

Sir John Templeton, creator of successful mutual funds, also believes it. And John Wright, founder of Wright Investors' Service, adviser to bank trusts. And Peter Lynch, who grew Fidelity Magellan Fund into the world's largest.

The NAIC philosophy is remarkably simple:

1. Invest a modest sum of money regularly over a long period of time.

2. Reinvest the dividends and the earnings from any sales.

3. Invest in companies that seem likely to be worth substantially more in five years. (A goal of doubling prices in that period can be realistic.)

4. Diversify, if possible, because diversification spreads your risk.

That philosophy excludes most of the popular notions to which investors are exposed. Nothing about timing, or gurus or trying to forecast the economy. Good stocks may fall; then they're a buying opportunity.

Though stock prices fluctuate, they move higher and higher - averaging about 11 percent a year for nearly 70 years. That doubles money in less than seven years. In 50 years, says the NAIC, prices may rise three to 10 times.

The idea is to participate, which takes time and perseverance. Good stocks reflect economic growth, which is the story of America. Ten shares of McDonald's cost $225 in 1965. That investment is now worth more than $100,000, after adjusting for numerous stock splits.

"Investment in common stocks is part of the American heritage of economic opportunity and freedom," says Thomas O'Hara, NAIC chairman. He knows. He is the fellow who began investing $10 a month back in 1940.