Preventing
Ghosts of Past Failures from Haunting Your Investment Decisions
By Anthony
Rhodes
Just
about every investor has a story to tell about a stock that he or she may have
owned, but perhaps should have purchased at an earlier date. Or conversely, a
narrative about a stock that he or she may have sold, but should have done so prior
to the time in which they actually did. Such admissions are common additions to
our investing lore, and are often recited over dinner or drinks, when the depths
of our failures are shared amongst one another, as parts of our traditional
bonding rituals.
But
sometimes, the residue of these failures can last far beyond the date of their original
occurrence. It’s not uncommon for some investors to recall these experiences when
deciding whether to buy or sell a stock in the present, but others,
unfortunately take this matter one step further, and allow these incidents to
hold sway over their investing decisions. So, with Halloween being right around
the corner, I’ll use this weeks’ version of How
To Invest to discuss methods for preventing you from being haunted by these
ghosts of the past. Also, in keeping with the spirit of the season, I’ll hand
out a few familiar treats which should help you to better manage your portfolio…minus
the usual after effects of sugar induced highs, of course, or the customary
lump of coal, for those of you who failed to dress appropriately for the
occasion.
The Payday Bar
Our
stock market failures can be quite painful, and could easily cause some
investors to develop a gun-shy mentality towards their future purchases. When
our investments unexpectedly move in a direction in which we hadn’t planned,
the ramifications can produce specters to haunt us, and bar us from receiving
the potential payday which might be right around the corner. The best way to
exorcise this ghost is to simply accept the market for what it is: an opportunity to improve your financial
situation. As with all opportunities, some may produce results, and others may
not, but all the defensive strategies in the world won’t remove your paralysis
until you come to grips with this reality, and be willing to accept the bad
right along with the good.
Hershey's Kisses (Goodbye)
When
we’ve owned a stock for a certain amount of time, it often becomes difficult to
part ways with it. With all the time and energy being placed towards our
pre-purchasing analysis of the company, selling it before it produces a profit somehow
seems wasteful, and could be interpreted by many investors as an admission of
failure. This apparition also tends to be mental in nature, and therefore, requires
a mental adjustment in order to be exorcised. By incorporating a mandate to
never, ever hold a stock beyond a
previously established price, you not only remove the specters’ powers from troubling
you in the present, but also rob this phantom of its ability to haunt you in
the future.
Halloween
is purported to be the one day out of the year in which the spirits of the past
are able to rise up and move amongst the living. Out of respect for the dead,
we attire our children in garbs of goblins, ghosts & ghouls, and fatten
their bellies with any number of tasty delights when answering the call of
“Trick or Treat?” at our front doors. But for many investors, the hauntings of
the past can linger far beyond this single, event-filled date. So, hopefully, this
posting will considerably shorten their ghostly visitations, and allow them to solely
answer their call during the one day out of the year in which they are actually
welcomed. Happy Halloween!
(Anthony Rhodes is the
President and owner of wealth management firm The Planning Perspective www.theplanningperspective.com )
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