How to invest wisely without owning stocks

Since I go on about the stock market so often, it seems only fair to disclose my own stock holdings every once in a while. So here’s the list.

I own one share of something called MMG. I don’t know what that stands for.

I got this stock many years ago after investing several thousand dollars in a company that specialized in colorizing black-and-white movies.

The company went bankrupt, and I lost everything I’d put into it. Sometime later, I was issued this single share of MMG — after the shreds of the original company emerged from bankruptcy, I guess.

MMG is worthless. I keep my one share because it’s too much hassle to get rid of it. And it’s a reminder of how dumb I can be.

I also have 32 shares of KeyCorp, a financial-services company in Cleveland. They’re worth just under $1,000. These I was left by a relative on my father’s side, though I can’t remember which one. I think they’ve gone up over the years, but I’m not sure. I keep them for sentimental reasons.

Next, I have one share of DaimlerChrysler, worth about $42. This is a sentimental holding, too. I got it when Chrysler took over American Motors. When I was a teen-ager, my father gave me a couple of American Motors shares to get me interested in stocks. The family car was an American Motors Rebel Wagon.

My last stock holding is 40 shares of General Dynamics, worth about $3,500. As a high school student in the ’60s, I wrote a term paper on the F-111 swing-wing fighter built by GD. I concluded it was the greatest fighter of all time. My father gave me about $100 worth of GD shares, and they’ve grown quite nicely. I’m keeping them for my son.

During the 1980s, I occasionally bought stocks. I did make money on some, but not a lot. All those investments are long since sold or wiped out when the companies went under.

This isn’t to say I don’t have investments. Quite the contrary: I invest a minimum of 25 percent of my gross income and rarely sell anything. My wife does the same.

But this money isn’t going into individual stocks. We invest in mutual funds that hold stocks. Except for a handful of shares in other funds bought many years ago, all our investments are in index-style funds that just try to match the performance of the overall market.

So what’s wrong with individual stocks?

Well, my track record isn’t very good. The more I learn about investing, the more I’m convinced my results with individual stocks are never likely to be very good.

Granted, people who get really rich with investing usually do it with individual stocks. Typically, they do it with one holding. They may get a lot of shares at a company’s founding, through employee stock options or because they made a brilliant — or lucky — pick.

But this isn’t a model for the rest of us. For one thing, it doesn’t account for all the people who went broke putting all their eggs in one basket.

To avoid that danger, you have to own a lot of stocks. Assume for the moment that you’d have to own 50. And assume you want really good ones that will give you a better return than you could get with a simple, plain index fund that guarantees it will match the overall market and carries less risk.

In that case, you might have to look at 10 stocks for every one you buy. That’s 500 stocks to study.

I’m just not going to spend my time reading that many annual reports, prospectuses and analysts’ opinions.

Investors can rely on full-service stockbrokers or other advisers to suggest stocks. But study after study shows the pros cannot consistently pick stocks that will beat the market averages. And the big commissions charged by full-service brokers can devour gains.

Mutual funds are simpler than individual stocks, and the fees and other costs of ownership are smaller.

And I’m content with market-matching returns.

When it comes to owning individual stocks, my handful of sentimental holdings is enough.