Yesterday, I gave my baseball mitt to a young boy in my neighborhood. He’s about five years old and loves baseball. I bought my glove over forty years ago, and it’s still in great shape. It treated me well over the years playing in various leagues. It was at my side while pitching, playing the outfield, and occasionally first and third base; though I was not a good baseball player, it was a loyal companion.
The glove I purchased was a Rawlings autograph model signed by Jose Conseco (no jokes, please), and it was expensive. I could have bought a cheaper one, but I wanted a quality mitt that would last a long time, and I did not want to replace it every few years, so I splurged and bought one I could count on for several seasons. My strategy probably saved me money since it remained intact and ready to perform these past few decades.
Quality is paramount when you’re selecting your investments. It’s better to buy a few shares of a great company than many shares of a lousy one, and owning ten shares of Apple is better than buying 100,000 shares of First Republic Bank, Enron, Pets.com, etc. A quality stock may appear expensive in the near term, but it could generate significant returns over time. McDonald’s is always costly based on traditional metrics like the PE ratio or its price-to-book, but it’s a perennial performer. If you bought McDonald’s in 1983, it has soared 26,327%, turning $10,000 into $2.64 million. It has generated an average annual return of 14.8% for four decades!
I started my career in 1989 when Berkshire Hathaway traded at $6,300 per share, and there was no way I would spend that much money to buy one stock! It was too expensive in my eyes, but what did I know! Not much. Berkshire Hathaway now trades for $502,880 per share, annualizing at 14% per year since I decided not to invest. I learned a valuable lesson about price and value, one I’ve not forgotten.
Let’s return to my glove. It had been in my attic for the past ten years, and it last saw action in 2008 at a corporate softball event. As my wife and I cleaned our attic, I knew it was time to give it away and let it bless someone else, which brings me to another point. We all have items in our attic or basement collecting dust that could enjoy a rebirth by donating them to a charity or giving them to your neighbor. You will experience great joy when you start to give stuff away.
A challenge I see when working on financial plans is that people are reluctant to donate money for fear of running out at some point. It’s a valid concern, though I’ve never seen it happen. Donating a percentage of your assets or income to your church or local charity will help many. It’s a chance to see your money in action while you’re alive, and it will benefit you the most. If you’re waiting to give away all your money when you die, you miss a tremendous opportunity to experience the joy of blessing others.
My glove recently reminded me that buying quality items is wise and that giving to others brings great joy and happiness.
Play ball!
Price is what you pay. Value is what you get. ~ Warren Buffett
May 1, 2023
Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on your asset level.
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