People pay attention when Mary Lehman MacLachlan talks about investing. Scores of clients have taken her advice in her 20 years as a senior private banker at U.S. Trust and Bankers Trust. Financial advisers listen to her as well in her new role as president and chief investment officer of Chicago's EnvestNet, an online support network for independent advisers. And you should listen to her. MacLachlan's $3 million stock portfolio has an annualized five-year return of 20% (as of Mar. 2), five percentage points better than the Standard & Poor's 500-stock index.
Those don't sound like a cautious private banker's numbers because they're not. MacLachlan manages her own money much differently from the more conservative asset allocation she recommends for clients. "I personally have an extremely high tolerance for risk," says MacLachlan. Indeed, she has half of her 40-stock portfolio in technology and biotech names AOL Time Warner (AOL
), Cisco Systems (CSCO
), EMC (EMC
), and Celera Genomics Group (CRA
). Not surprisingly, her portfolio took a 30% hit last year. This year her account is flat, vs. -6.5% for the S&P 500.
CONFIDENCE. MacLachlan exudes so much confidence you want to just give her all your money to invest. But she would be the first person to tell you to take responsibility for your own finances. That's her first rule of investing. She learned it over 20 years ago, when she found herself divorced with two small children and working as a trust and estates attorney. She turned over $350,000 from the sale of her apartment to a stockbroker, who put it into municipal bonds just before interest rates soared. The account lost more than half its value. "I learned to trust no one with my money and decided to invest and manage it myself," says MacLachlan, 54.
To get started, MacLachlan looked to those whom she considered to be smart investors. And that's the second rule. She bought her first stock, drugmaker Eli Lilly, when she noticed it in a client's estate and saw how it appreciated. "It's not hard to see what successful investors are doing and copy them," says MacLachlan. Not everyone has regular contact with shrewd stockpickers, but she says you can learn much through networking and tapping into resources on the Internet.
Next, there's Rule No. 3: Develop your own strategy. Hers is to invest in companies that have strong management with unique positions in a growing industry. For example, MacLachlan bought $50,000 worth of Qualcomm in December, 1996, when it was about $5 a share. She learned of the company from a coworker. "It had a unique patent that was critical to wireless telephony," she says. As the stock soared she took profits several times to reduce her stake. That's the fourth rule: Never let one company become more than 10% of the portfolio. Diversification tempers a portfolio's downside, she says.
MacLachlan sold her last shares in January, 2000, after a waiter asked her opinion of the company. She netted $120 a share on a split-adjusted basis. She missed selling Qualcomm (QCOM
) at its peak but has no regrets. That's because of her fifth rule: Don't fall in love with a stock.
"I buy stocks like I buy art," she says. "I enjoy it for a few years and sell it." For instance, MacLachlan met and liked the management of Human Genome Sciences (HGSI
), so she bought 300 shares last March, at 88. She sold it three months later at 158 because it went up "too much, too fast." She bought it back recently at 54 because she still believes the company's prospects are great.
Finally, MacLachlan suggests you stick with what you know. In 1997, when the Russian stock market was red-hot, she took $100,000 of her husband's IRA and invested it in the Optima Opportunity Fund, a private equity fund with Russian securities. Within months, the account plummeted to $8,000 and now is around $20,000. "That's the only time I've forgotten my rules," she says. "What did I know about Russia?"
MacLachlan does know about the stock market. She believes tech stocks are close to a bottom and will resume an upward trend, "but it will be a bumpy ride, so you'll have to have nerves of steel." No doubt, MacLachlan does.
Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
Printer-Friendly Version
