Originally Posted by Nurse
Besides the glowing report and statistics of the small benefits of having a stock holder credit, the risk inherent to in any such purchase should be the prime consideration. Since we had some statistics on the wonderful benefits of owning RCI stock then there should also be a few facts about the other side of the coin, which is often neglected.
Had one purchased the minimum 100 shares of RCI stock the first week of last November for the price at that time which was about $52 per share, to get a stock credit and took a one week cruise you would have received a $100 on board credit from Celebrity. Initial investment $5,200. With the RCI stock price, as of the close yesterday of about $39 per share, (value $3,900) you would be looking at a loss of about $1,300, for your 100 share minimum purchase. Now in that case you would have needed to take 13 one week cruises to be even, not counting trade commisions and what interest you could have made elsewhere with your $5,200 investment. Now I am sure someone would say, well the solution is to take more cruises on Celebrity but then there is this little problem that I have, and that is, that I can not afford to take 13 cruises!!! In fact, I can barley scrape enough to take one cruise per year.
Granted, there can be some small benefit to owning stock but the downside for me far outweighs any benefit from a small on board credit. I am not "in love" with any particular cruise line and enjoy going on different cruise lines and ships and the change adds to the enjoyment of my vacation. Not owning stock in any particular cruise line also allows me to price shop when looking for a particular itinerary and this almost always more than offsets any stockholder credit that I could have received. It is great that we all can have different opinions but both sides of any issue should always be considered and not just one side.
Some years ago, a passenger on a train got talking to a famous investment guru who happened to be in the next seat. The passenger told the investment guru that he would like to invest in stocks, but that he was very reluctant to do so because he could not figure out what the market was going to do. "Oh, I can tell you exactly what the market will do!" the guru replied. Overhearing this, dozens of heads in nearby seats perked up their ears to hear what the guru was going to say. The guru continued, "The market will fluctuate."
And the stock markets do indeed fluctuate. For every stock on the market, you can find a period when its price dropped by 25% -- as in your example -- without trying very hard. Nonetheless, the market's fluctuations are biased upward. Over the course of two centuries (from 1801 to 2000), the New York Stock Exchange posted a compound annual return of 10.8% per year in dividends and appreciation of share value, for a net real return of 8.8% per year after adjustment for inflation -- and that's including every listed company that went bankrupt during that period due to mismanagement, obsolecense, and other causes. Healthy growth companies often produce returns that are much higher than the market average for their investors.
The stock market is not an appropriate place to invest money that you will need to spend in the near term (less than five years) precisely because it does
fluctuate. Nonetheless, stocks produce the largest average compound rate of return, over the long term, of any investment that's available to most individual investors.
Let me repeat that statement. Stocks produce the largest average compound rate of return, over the long term, of any investment that's available to most individual investors.
You don't have to take my word for this, since many highly respected authors in the area of personal finance including Dave and Tom Gardner (The Motley Fool Investment Guide
), Berton Malkiel (A Random Walk Down Wall Street
), and Jeremy Siegel (Stocks for the Long Run
) have demonstrated it beyond question. In fact, the real danger to one's financial security is supposedly "safe" investment vehicles, like savings accounts and "money market" funds, that don't even match the rate of inflation, thus eroding the real value of one's capital over time.
So the real question here is not whether the volatility of the market can cause a stock to drop in value in the short term, but rather whether Royal Caribbean Cruises Ltd. (NYSE: RCL) presents a greater risk than the other stocks that one might have in one's portfolio.
And there, I think not. In fact, I think that Royal Caribbean Cruises Ltd. will post above average growth going forward -- which is precisely why I own more than the minimum number of shares to obtain the shareholder benefit.