Halloween Tricks for a Better Treat(ment) of Your Portfolio

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 )