What’s a mock portfolio? – M.R., Port Charlotte, Fla.
Mock portfolios are terrific for new investors and those who want to test investing strategies. With them, you go through the motions of investing, stopping short of actually plunking down your hard-earned cash.
Research companies that interest you, decide which ones you’d buy, and then set up a pretend portfolio, either on paper or online (at sites such as finance.yahoo.com/portfolios and dailyfinance.com/portfolios.) Record details such as when you “bought” the shares and at what price. Then track your performance over time and see if you beat the market.
My Dumbest Investment
Back in the 1970s, inflation was so high that commodities made more sense than stocks as investments. A friend and I pulled together $5,000, formed a partnership and opened a commodity account. We made a little in beans, then we lost a little in bellies, and then started buying potato contracts. Spuds went up, and then sharply down.
For those who don’t know, it’s possible to lose far more than your original investment in futures contracts, because of the leverage involved. It’s also possible that you can’t buy or sell when the market is going against you. We ended up lucky, losing very little. Later, I learned that the potato market had been manipulated by a potato baron. The moral of this story: When the elephants fight, only the mice get trampled. – R.T., online
The Fool responds: You were indeed lucky. Commodities have severely burned many investors, which is why most of us should avoid them.
I began in 1886 in Minneapolis as a watch company. Based in Illinois today, I’m one of America’s largest general retailers, with more than 4,000 stores in the U.S. and Canada. I merged with another big name in 2005 – a retailer founded by Sebastian Kresge in 1899. I’m America’s largest home appliance store and am also known for my tools, automotive maintenance services and more. I perform more than 11 million service calls to homes each year. My brand names include Kenmore, Craftsman, DieHard, Lands’ End, Jaclyn Smith, Joe Boxer, Apostrophe and Covington. Who am I?
Last week’s trivia answer: Founded in Pittsburgh in 1920 and based in Manhattan now, I’m the world’s top publisher of children’s books. Who am I? Answer: Scholastic.
The Motley Fool Take
Shares of Dell (Nasdaq: DELL) dropped recently when the computer builder reported disappointing quarterly earnings. Investors must not have noticed that management has high earnings expectations for next year, and that Dell’s strategy is firing on most of its cylinders.
Dell has lost its grip on the skimpy-profit-margin PC market it once ruled. New competition is coming up from the likes of Acer and Lenovo, companies close to Asian manufacturing centers. Dell and competitor Hewlett-Packard can’t win that war and turn a profit at the same time.
That’s why Dell is assembling a facsimile of the IBM business model, aiming to offer businesses the (higher-profit-margin) tools they need to run a data center, from consulting services to servers and storage boxes. Every acquisition Dell made in the last few years has moved the company closer to this ideal.
Reach the Gardners at firstname.lastname@example.org, or by mail to Motley Fool, 1130 Walnut, Kansas City, MO 64106.