Investing With Dick and Jane
By Richard Schmitt
NEW YORK (TheStreet) -- One morning Dick went into the woods. Dick found a stick. Then he found another and another . . . . In all, he found and gathered 100 sticks and brought them home. These were no ordinary sticks now. When Dick got back home that morning, he learned he could sell his sticks for $4 a piece. So he set them aside for a rainy day and stashed his sticks in a hole. You could say he set-it-and-forget-it.
That same morning, Jane went into the woods and found 100 sticks of her own. Upon Jane's return home, Dick told Jane her sticks were worth $4 a piece. In the afternoon while Dick was napping, Jane went to the market and found the price of a stick had gone up to $5. So she sold 20 sticks for $100, leaving her with 80 sticks and $100 cash at the end of the day. So now both Dick and Jane had portfolios worth $500.
Still holding a bunch of sticks, Dick and Jane checked the stick market the next day. It turns out that by the end of the next day, the price of a stick had come back down to its original $4 price. So Dick's stick stash -- of 100 sticks at $4 per stick -- was still worth the $400 he started with the day before. However, Jane had 80 sticks at $4 a stick worth $320, plus $100 from her stick sale the day before. Her balanced portfolio of sticks and cash was now worth $420. That's $20 more than Dick had.