Some Lessons Learned In 76 Years of Investing
HARVARD University graduate Philip Carret (class of 1917) has flown a Sopwith Camel airplane, viewed 18 solar eclipses, and spent 76 years investing in stocks and bonds. In 1928, Mr. Carret established the Boston-based Pioneer Fund, described in the February 1995 edition of Mutual Funds magazine as the No. 1 mutual fund in America in total performance among mutual funds operating since 1929.Skip to next paragraph
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Mr. Carret (his name rhymes with ''beret'') actively managed the Pioneer Fund until 1983. Today, he is chairman emeritus of all the Pioneer funds and founder of Carret & Co., a New York money-management firm.
With this article, the Monitor launches a regular Monday column on personal investment and other money matters. Monitor writer Guy Halverson in New York interviewed Carret.
Your investment philosophy seems straightforward.
It is very simple; buy good companies and sit on them. There are good well-managed companies, which are a relative handful. There are companies that have moderately good management, which at least are not going bankrupt but probably are not going to give their stockholders glowing returns. There are companies which are over-leveraged -- they owe a lot of money and are skating along on thin ice; when things get tough they are going to go bankrupt. So the job of an investment manager is to pick the good [companies] and sit on [their stock for many years]. One of the great faults of investment analysts is to try to put limits on what they recommend. They say, for example, ''here's a stock selling at $12 [a share]. Sell at $18 a share.'' That's nonsense. If that's all you expect out of it, leave it alone. If you buy it at $12 and you think it might double, one should feel comfortable in buying it. Probably the greatest performer in recent history is Berkshire Hathaway. [Berkshire Hathaway Inc., based in Omaha, Neb.] I bought the stock about 10 years ago at $400. Imagine how I'd feel if I sold it at $800. [It was recently selling at more than $24,000.] Why sell anything unless something goes wrong?
There are so many bewildering investment options today.
They are confusing. I have a simple mind. I don't understand these derivatives. I know in a vague form of way what a derivative is but a lot of derivatives are totally mysterious to me.
What would you say to a young person or first-time investor about how to get into financial markets?
Buy mutual funds. But I'm prejudiced because I've been in the mutual-fund business since 1928. A mutual fund will do as well as the market in general, which is not brilliant at all, but you are not going to lose your shirt in it unless you get some crazy [fund] management that buys derivatives. [A mutual fund] will do better for you than the average individual could do trying to pick stocks on his own by reading brokerage-house letters.
Should a new investor buy some bonds?
I think so. You can get a yield of 7 or 8 percent. From stocks you can get a [current] return of 2 to 3 percent. [Bonds] are a good hedge against the ups and downs in the stock market.
Some people equate investing with speculation. Is there somehow something wrong with investing your assets?
No [laughs]; it's speculative not to invest in them. You are speculating that the country is not going to make any progress. I remember reading, years ago, Gibbon's ''Decline and Fall of the Roman Empire.'' The American ''Empire'' will decline sometime, but certainly not in your lifetime or the lifetime of your children.