When I was 12 and quite the geek (what’s changed?), I would lie on the carpeted living room floor and read the stock tables in the newspaper, focusing on companies I knew and whose products I used. Kodak was number one, because my father worked there, but there were other Rochester, New York, powerhouses such as Xerox. My father, who had been an economics major waaaaaay back and watched my stock market fascination with interest, suggested we take $100 and buy some stock.
This seemed like a good thing to do. Kodak stock had in effect made a friend of my mother’s rich. Mom mentioned sometimes that “Aunt” Cathy’s father had been George Eastman’s lawyer, which proved fruitful for him and his daughter. She lived with her husband in the Virgin Islands, which sounded quite romantic, and they didn’t work, which sounded ideal. Why not me?
Kodak had made many Rochesterians wealthy, but Xerox was the feisty new kid on the block, the fast-growing “high tech” company of the time. It introduced the Xerox 914 copier in 1959, which went from zero to $60 million in annual sales in 1961, and then to over $500 million in 1965. This insanely explosive growth naturally sent the stock flying. My parents’ friends, the Nobles, had invested in Xerox early. Like Aunt Cathy, they didn’t work either.
But what to buy? We already were invested in Kodak through my father’s job and stock, and no way would a Kodak family in Rochester buy Xerox stock (and vice versa). Fortunately, I was pretty aware of candy and cars. I chewed Wrigley’s, favoring Juicy Fruit and Spearmint. That was comfortable and familiar. Where we had once owned Buicks, my father had come to favor Fords. We had an old sea green Ford Falcon, which needed an oil pan heater in the frozen north winter to start in the morning. Always a fan of the underdog, I decided on Ford.
My two shares of Ford most certainly did not make me rich, not least because I later sold them for college. The stock rose 345% from then to today—over 47 years—for a mere 2.7% a year. But there was so much more. If I had kept the stock and all its dividends, $100 would be worth $3,440, a much better 7.8% annually:
Keep adding zeroes: $1,000 becomes $34,400, $10,000 grows to $344,000…and so on. This is how a little money becomes a lot, and this is just little old Ford, which hasn’t exactly lit the world on fire (though unlike General Motors or Chrysler, it did not go bankrupt). Ford’s history shows that while it’s great to buy and “hope” for a higher stock price, it’s even better if the company pays you dividends in cash while you wait—and if you save and invest those dividends.
It’s not always right to “buy what you know.” Kodak eventually went bankrupt—twice!—and the stock was worthless. Xerox is a shadow of its former self. Both failed to capitalize on their other technological advances. On the other hand is my friend’s mother, who kept buying stock of Seattle area companies Microsoft, Amazon and Starbucks, because she saw their presence all over town and used their products and services. Nice. But if you have a long-term view, you don’t need to buy those famous stocks, which have been like lottery tickets, to do well. Even with a Ford, time is the greatest friend—along with regular dividends—of someone wanting to invest savings for the future.