March 13, 2019 | Nancy Woods



One of the most difficult things for a person to do is to admit when they have made a mistake. There are several kinds of mistakes that have various repercussions: It can be the misspelling of a word, saying the wrong thing, putting too much hot sauce on your food or asking a woman when her baby is due when she’s not pregnant. of the worst mistakes is when the repercussion is a financial loss.


Believe me, as an advisor who is responsible for the financial wellbeing of my clients’ financial futures, I take it very seriously. I am not one who enjoys being responsible for a bad investment. What I do understand is that I am human and not free from making mistakes. It is a very difficult phone call for me to make to a client when I have to talk to them about taking a loss on a failed investment.


Because of the fear that most people have, it is more likely that you would hear from an investment advisor who will call you to sell a profitable investment, than one who will call you to sell a loser; it’s fully understandable. The problem, however, is that if over time you continually sell your winning stocks and either don’t have the discussion to sell the losers or choose not the sell them, you will eventually have a portfolio of more stocks with losses than ones with gains. Typically, you then get annoyed with your advisor and look to find another one.


When my children were growing up, it was important for me to teach them the lesson when it came to a mistake. Acknowledge it, apologize for it, fix it if you can and try to make sure it doesn’t happen again. Learn from it.


Granted, when it comes to the stock market and stock selection there are many, many external factors that can have an impact on your decision. It is the unpredictable factors that can positively and negatively affect a stock or investment. Right now I’ll talk about stocks, but similar things can happen to bonds.


My process behind the scenes is quite extensive before recommending a stock to a client. I often find my ideas from reading and observing things in the everyday world, at least to get my initial idea. It is the way of Peter Lynch, the wildly successful Fidelity mutual fund manager. I’ll look for things that have popularity, trends that are developing and economic changes that go on. The idea can pop up from anywhere. Once I have an idea, I will look at all companies that are involved in that industry. I’ll find out who the competitors are, what the future growth projections are, the price trends, the past history and the uniqueness, to name a few. Figuring out if most of the return of a stock is from its dividend payment or price appreciation is important to me as well. Once I have made the final decision, I then figure out which clients of mine the investment is suitable for. This is important because everyone has different time horizons, objectives and risk tolerances. Then we make the purchase of the stock.

for the difficult part. After all the reading of research has been done, we make the investment with the very best intentions. However, sometimes after purchase, I’ll monitor the stock and see that it has deteriorated in price. It is usually due to something negative that has changed for the company, be it a change of management, a new disruptive competitor, or a cutting of the dividend, for example, that would cause me to consider

selling the stock. If the decline is just a result of general market weakness and there is no apparent risk to the company I will ride the weakness out.


If, ultimately for whatever reason, I make the decision to sell a losing investment, believe me it is not one that I take lightly.


I too am human. From a selection of ten stocks, I expect two or three to be stars, two or three to be dogs and five to keep up with the market.


I have learnt to use the advice I gave my children: If you make a mistake, acknowledge it, apologize for it, fix it if you can and try to make sure it doesn’t happen again. Learn from it.