Today is Valentine’s Day, the day of the year when our thoughts turn exclusively to matters of the heart. That’s right it is the day of LOVE! We are all for love, especially for our sweethearts and our families. One kind of love we are most definitely opposed to is the love of specific investments.
Far too often we speak to people who have a stock that they have gotten emotionally attached to. See if any of these scenarios fit you:
- You inherited a stock from your mom or dad and you don’t want to sell it because it once belonged to them;
- You bought a stock and it has ‘been very good to you;’
- You bought a stock and it has made you ‘lucky;’
- You bought a stock and it has gotten killed, but you won’t sell it until the price goes back up.
These are a few of the more common scenarios we see people stuck in. They become emotionally attached to their stocks, or emotionally invested in achieving a certain outcome before they are willing to ‘move on.’ And don’t fret if you see yourself here. Our own COO admitted to me today that she became attached to Leapfrog (LF) because the company makes learning toys for children. A concept she believed couldn’t fail, even after her frog stock started “leaping off the Empire State Building.”
The right time to Love the One You’re Withis with the important people in your life, not inanimate and intangible objects like investments. Trust us, your stocks are definitely not loving you back. They don’t even know you exist.
The best way to handle securities you feel attached to for any reason is to first, recognize that you have an emotional connection to it. Empowered with this understanding, you are free to then consider whether that security is the very best way to achieve your objective for that portion of your portfolio from this moment forward. Ignore everything that happened before now. That is all in the past.
There is a name for people who assume that past performance of an investment is somehow predictive of what will happen in the future. We call them Rear View Mirror Investors, and they are one of the major reasons that, according to DALBAR the average investor has only earned 3.49% per year between 1990 and 2010, while the S&P 500 Index earned 7.8% over the same time. People can be their own worst enemy when it comes to investing. Emotions have no place there.
The moral of the story is: don't fall in love with your stocks. Fall in love with your spouse, your kids, your favorite sports team and other aspects of your life, but do not fall in love with your stocks. Successful investors have mastered the skill of emotionless investing. Often times it takes someone else’s guidance to do so (which is what we are here for), but emotional investing clouds your ability to make good decisions and is detrimental to your wealth…and happiness.
Happy Valentine’s Day from the Del Monte Group Team!
“One-size-fits-all” won’t fit you here! The Del Monte Group team understands that everyone’s financial goals are unique. That’s why we always provide customized advice. No matter where you are in life, you can depend on our proven expertise to provide financial planning support for long-term success. Ready to get started? Schedule a meeting with Richard or Angela in our Alamo, CA based office today or we can meet via Zoom! >> You can select a date and time that works for you via our calendar, call us at 925.736.6410, or send an email to Info@APlaceOfPossibility.com. We can’t wait to help you!