Investing With Dick and Jane

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

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.