Roses are red, violets are blue, your stocks don’t love you.
While I’m personally not the biggest fan of Valentine’s Day, in acknowledgement of the 50% off heart-shaped chocolates this weekend, I thought it might be a great week to talk about taking your emotions out of investing and into places where it will be more mutual.
Too many investors expect everlasting devotion and love from their stocks when in reality a stock isn’t smitten when you buy it and doesn’t cry when you break up with it. I know this sounds somewhat silly but acknowledging that our emotions are very one-sided when it comes to the investor-portfolio relationship is one of the keys to successful investing.
That said, this concept is easier said than done because we’ve been conditioned to expect instant gratification and believe that if we buy into an investment, it should go up…humour me with a sample love note to your portfolio holdings:
You’re special. I’ve picked you to be in my portfolio because I expect that you will always increase in value, make me lots and lots of money and never leave me or disappoint me.
I love you.
Love and emotions have nothing to do with the market – but as intelligent human beings we are naturally and justifiably very emotional with our money – which is where the lines become blurred.
I tell all of my clients (especially before we make it official) that liking and trusting one another is critical to our long term relationship because of the innate risk inherit to the entire market (known as systemic risk). Your portfolio will go up and down in value but with professional guidance, strategic research, proper diversification, a disciplined asset allocation, generating tax-efficient income and a proper financial plan, your investments will show you that love you expect today, over time.
In the mean time, should you be seeking a more mutual love, here is a great article on getting financially intimate with your special someone; with money being cited as the top cause of divorce, it’s worth a read to ensure your marital – and financial – bliss.
Also, in the spirit of Family Day, a holiday which celebrates the importance of families and family life to people and their communities, I’ll point your direction to a great publication our Wealth Management team has put together which outlines 10 strategies to building and protecting your family’s wealth. For your complimentary copy of the Family Wealth Management Guide, just say the word.
With so much going on and information coming at us from every angle, it's sometimes hard to keep your finger on the pulse of what's happening. In an effort to keep you in-the-know and provide you with some conversation nuggets for the holiday weekend, I've compiled the following hit list to fill your conversation pipeline.
Now you are in-the-know with Word on the Street.
Enjoy the weekend.
Investment & Wealth Advisor
Chaaban Wealth Management Group