A Tale Of Two Investors

02/28/01 02:13:54 PM PST

by Sharon Yamanaka

Here are two investors with two very different ways of looking at how and why they invest the way they do.

They were the best of investors and they were the worst of investors -- in a manner of speaking. And in picturesque Santa Fe, NM, Phyllis Mazo and her friend Carolyn Roberts are investing exactly the way they want to for their own specific goals and needs.

Phyllis and Carolyn met while working on a gubernatorial campaign two years ago. They are both politically active, but that's where the similarities end. Phyllis is tall with a brash, flamboyant personality. She loves to fly and once owned her own aircraft. Carolyn is short, with rosy cheeks -- a caretaker extraordinaire. As Phyllis puts it, "she's as ladylike as I am rambunctious."

An investor's personality is critical to his or her ability to choose and stick with a working investment strategy. Their investments tend to be more successful when they are compatible with an individual's personality as a whole. How do Phyllis's and Carolyn's investments compare?

PHYLLIS MAZO

Phyllis's personality and lifestyle mesh with her investments. She points out that women invest differently from the way that men do. Her stock investments are focused on a goal. The money she has made in the stock market wasn't for anything like "appreciation" or "growth," it was often for luxuries like a $3,000 concha belt or a trip to the Antilles.

Despite her admitted "disrespect for money," Phyllis is a shrewd investor. In fact, she has invested her money so successfully that she's able to live off her profits. She plans to enjoy herself and spend her kids' inheritance. Not to worry, though, it's a calculated move; her kids can take care of themselves, and she is teaching her 12-year-old grandson the finer points of investing. So far he's bought shares in Toy R Us and McDonald's for his college education fund, and he has several thousand dollars in a savings and checking account fueled by his own contributions as well as "Nana" Phyllis.

Not that she was always like this; Phyllis got there the hard way. Suppose after 30 years of marriage you separate from your husband. In the process of splitting the joint assets, you find that your spouse has been faithfully depositing $2,000 per year into his Ira -- and only a few hundred in yours. Phyllis found herself in that position. After doing some simple math, she realized that she couldn't live off her share of the split assets indefinitely. She was just reaching 60, and really didn't want to go back to work. She had always been interested in investing, so she decided to take a crash course on the subject, starting with everything she could get her hands on -- newsletters, magazines, seminars, advice from stockbrokers -- everything. A financial seminar introduced her to an investment strategy that worked well for her, although "the first two years, I was scared to death," she says. During the first year of her separation from her now ex-husband, her investments were to "keep the wolves away," and ultimately to give her freedom.

Phyllis began her investing career by selling her private plane for seed money to play the stock market. One of her first memorable investments was in the mining company Pegasus. At one time, she had been opposed to the company's plans to reopen an old mine in a residential area. Phyllis was the only citizen representative on the mining plan review board, which included experts in engineering, business, and ecology. She learned a lot about the ins and outs of the mining business. When her stockbroker advised her to invest in what she knew, she invested in yet another mine.

Gold mines in New Mexico? Is this the action of a responsible investor? For Phyllis, who had "substantial respect" for one of the owners, it was. She also points out that this was done before she separated from her then-husband, when risk was not yet a factor, and that the ecology issues had been satisfactorily resolved. On the other hand, she wasn't looking at it as an investment in a gold mine. Rather, it was "my tentative excursion into investing."

Phyllis takes some of the pressure off by likening the stock market to a game. She uses gambling terminology to name and describe her investments, but says they are just that: shrewd investments. She is a chartist, admitting that she "can't read a balance sheet" and that if a stockbroker can't explain something to her in plain English, then it's just double-talk -- just words and not reality. In lieu of a prospectus, she uses Mike Murphy's Technical Investing newsletter as a starting point for locating fundamentally sound companies. Phyllis looks up the stocks he recommends on the Internet, systematically calling up charts from five years back to intraday to see how they've done in the recent past. By looking at these charts, she can see the stocks' past performances, and from there she can evaluate their future profit potential.

The Internet has been a huge learning experience for Phyllis, and the easy availability of stock charts has allowed her to do the type of investing she's been pursuing. She does her homework and spends a lot of time researching stocks before she puts in the buy order. Most important, she knows where her exit is going to be before she enters. Knowing when to get out is about as important a concept as there is in stock market investing, Phyllis says; she likens it to the well water in New Mexico. "Until it's in your storage tank, it isn't yours. It's flowing under your feet," she observes. Some of her pet stocks are Intel Corp. (INTC) and Microsoft Corp. (MSFT). JDS Uniphase (JDSU) and Manhattan Scientifics, Inc. (MHTX), have also been kind to her. She loves the volatility of the current stock market. "Volatility is the ally of a long-term investor, with the caveat that if you don't take the profits when they reach your criteria, either percent or gain, they aren't realized and you've missed an opportunity," she observes.

In the current bear market, Phyllis is taking Mike Murphy's newsletter advice: "When the going gets tough, the tough go shopping." Always attempting to learn, she is "mustering up the courage" to double up on recommended holdings and, hardest of all, to sell her losing stock, take the loss, and use it as a tax deduction. She comments that this never made sense to her until a stockbroker pointed out that she could reinvest in these stocks, but at the lower price. Her money could be better used by investing in the bargains left after the drop in technology stocks, the broker said, or in stocks advancing now at a faster rate than her losing stocks.

Wall Street, to Phyllis, is an incarnation of Filene's Basement, the famed department store. Merchandise would be marked half off the regular price, and if it wasn't sold in a week, prices were cut in half again, and again, until it sold or was given away. With that in mind, Phyllis plays the stock market, doing what many people only wish they could do.

NO WOMAN'S AN ISLAND

Phyllis was brought up under her mother's "Depression philosophy" and Christmas club-style of investing. The latter, a simple form of putting money away, involved savings coupons for perhaps $10 a month; at the end of 12 months, the saver would have enough to buy his or her Christmas presents.

Phyllis says although her mother now has plenty of money, she still has that Depression-era mentality. Her mother had always been scared to death of outliving her income, and although she's now in her 90s, she still insists she can't spend anything. Phyllis has seen her mother deny herself many opportunities, even when she had sufficient funds. Although she respects that type of thinking, it still gnaws at Phyllis to see her mother wanting for no reason. This says something about Phyllis's philosophy about money, she admits -- she can be less stringent on herself, knowing that she can spend money and not feel guilty about it.

Phyllis says she doesn't want much. She has always had her health, owns lots of jewelry, as much as she'll ever need, and most of all she has her freedom. She doesn't have to think twice if she wants something. She's quick to point out that it doesn't mean she's blind to the value of a dollar or that she throws money around. It means she bargain shops for most of her things, and when her grandson needs something, she can go out and get it. And then of course there is the occasional indulgence in impulse spending -- that $3,000 concha belt, for example.

CAROLYN ROBERTS

In contrast, Carolyn Roberts has little interest in managing her own money. When she received an inheritance in 1981, she selected a financial manager to help her, establishing a retirement fund. Later, she used the fund and her IRA to pay for her schooling, eventually using it to earn a master's degree in nursing. After she dissolved her IRA to pay for her education, she lost touch with her financial manager for a number of years, until she again inherited money. That time, her inheritance was invested in various money market and growth funds.

Carolyn's formative years were in the late 1960s and early 1970s. For a long time, her philosophy was, "Eat, drink, and be merry, for tomorrow you die." Perhaps because Carolyn is a nurse, there is no may in that old adage. With her retirement money regularly subtracted from her paycheck, she is free to do whatever she likes with the rest of her money and time. She is devoted to her career -- she is the clinical director of college health at the College of Santa Fe and the treasurer of the New Mexico Nurses Association -- and her family. Carolyn's two sons are 22 and 18 years old. She and husband Richard designed and built their home just outside of Santa Fe proper. The family money goes to filling the house with electronic gizmos such as DVDs, computers, and VCRs. Each family member has at least one of each, plus at least one vehicle apiece.

Carolyn considers her investment in her education to be well worth the sacrifice of her original retirement fund. In fact, the 26 years of investments in her husband's retirement fund, plus her invested inheritance are sufficient to give them a comfortable lifestyle once they decide to retire.

In the meantime, Carolyn's financial advisor has given her 10% of her investment money to "play around with" and buy those stocks that sound interesting to her. She opened a brokerage account, but admits that most of the time the money "just sits." But as the milestone age of 50 approached and then passed, Carolyn realized that she and Richard needed to be more proactive about saving for retirement. With that in mind, Carolyn once again started her own retirement account when it became available to her through her employer.

When asked what she anticipates will be the greatest reward of her successful investment strategy, Carolyn says immediately: "Travel! I've only been on one vacation in my life. I went to Mexico for my 25th wedding anniversary." Why weren't there more vacations? Finances and time aside, Carolyn says she has to "twist Richard's arm to leave the house, much less the country." Of course, that will all change once they retire.

AS FOR THE REWARDS

Carolyn, a dedicated liberal and a genuinely caring person, often works for worthy political candidates. It was on a recent gubernatorial campaign that she met Phyllis. Despite what Carolyn refers to as Phyllis's "interventionist investing" tactics, the two of them have found surprising areas of agreement in ethical, philosophical, and ecological topics. Phyllis has become a fairy godmother to the local youth, "adopting" many grandchildren in addition to her real grandson and sponsoring youth athletic teams. She's also made a list of things to accomplish in her lifetime and she says she's done most of them, including flying her own aircraft, driving a train, driving a semi, and sailing a boat. If she couldn't do it with her own vehicles, she's talked people into letting her drive their trains and semis. One way or another, Phyllis has gotten what she wants. And so can you, if you match your investment philosophy to your personality.

Pictured above are a sampling of Phyllis's adopted grandsons. Top: The youth basketball team that Phyllis sponsors huddles at halftime. Middle: Phyllis's eldest "grandson" hits a pose for extreme fighting, which is a sport that is a cross between martial arts, boxing, and wrestling. Phyllis is his fight manager. Lower: The Little League team that has named Phyllis their team "Nana."

Sharon Yamanaka can be reached at SYamanaka@Traders.com.

Sharon Yamanaka

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