Greed, Envy and Goals

June 13, 2017


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As our group of domino players assembled for our semi-regular game of strategy and trash talk, Phillip started to complain.

Apple’s stock was up more than 50% this year, but Philip had sold out. He missed out on the recent run and was nursing a bad case of seller’s remorse. It didn’t help that one of his co-workers, Harvey, continued to brag about how much money he was “making” trading stocks.

As the evening progressed, Phillip’s complaining increased. I suppose it didn’t help that he was losing at dominoes.

 After a while, we stopped to take a break and, although I knew the answer, I asked Philip why he sold his Apple stock.

He thought for a moment and recalled that he used some of the proceeds to pay his daughter’s college tuition. I nodded my head in agreement and asked what else. Phil thought a minute and remembered he had to fix the transmission in his wife’s car and had allowed a credit card bill to build up from a trip the family took last summer.

Liquidating the Apple stock allowed him to pay off those items. In the process, he and his family were in a much more stable position. However, it kept bothering him that he had missed out on the opportunity to own a “can’t miss” stock.

This is not the first time Phil and I have had a conversation of this nature. As a result, I asked him to keep an investment “scorecard.” Every time Phil made (or thought about making) a buy or sell decision, he would document it. Otherwise, our memories have a funny way of playing tricks on us.

As Phil reviewed his scorecard, he recognized he sold his shares in UnderArmour as well as Imagination Technologies. By selling these, Phil was able to reduce debt and increase his emergency cash to six-months’ worth of living expenses. Both were great ideas.

Since he was complaining about Apple’s performance, I asked him about UnderArmour and Imagination Tech since he liquidated. He wasn’t too sure. As he pulled quotes on his phone, Phil realized one was down 34% and the other was negative 55% in the last year. Phil nervously smiled recognizing his financial picture would be quite a bit worse if he had hung on to those. 

I then asked him about Harvey’s portfolio. Phil immediately lamented about how much money Harv said he was making. 

I reminded Phil that this was the same Harvey who bragged last year about the killing he was going to make owning things like Sun Edison, Frontier Communications, Noble Corp and Sanchez Energy.

Phil started to remember that conversation and pulled quotes on those holdings. They were all down between 57% and 75% in the last year. Phil gulped and had a bit of relief that he did not follow Harv.

Before we returned to the game of dominoes, we did a short review.

Smart investors cover necessities first. If you don’t have emergency and short-term funds set aside, you are constantly at risk of having to liquidate long-term assets to cover short-term needs. Inevitably, this forces you to sell at a less than perfect time.

Hindsight is always perfect, but impractical. Whether reviewing your portfolio or your neighbors, everyone can be a terrific Monday morning quarterback. However, it does not help your mental or financial picture.

A smart portfolio is balanced as it must serve multiple needs. It never makes sense to have all your eggs (or apples) in one basket.

People often talk about their winners—especially the braggarts in our lives. They have losers too. Together, they comprise a portfolio. Run the performance on your cohesive portfolio. Otherwise, you will drive yourself nuts if you constantly focus on just one or two holdings.  

Know what you own and why you own it. The only portfolio that matters is yours. Your goals are most likely completely different than your neighbors or friends. Be true to who you are as that is all that matters.

Successful investing and financial management are predicated upon discipline — not finding some superstar stock.

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Topics: Investing

Dave Sather

Sather Financial Group

Dave Sather is a CERTIFIED FINANCIAL PLANNER and President of the Sather Financial Group, Inc. Sather Financial Group is a $400 million “fee-only” wealth management firm based in Victoria. Sather Financial is ranked as one of the top independent wealth management firms in the country according to Financial Advisor Magazine. Dave was raised in El Paso, received his B.A. in Business Management from Texas Lutheran University and received his M.B.A. from Texas A&M University. He has spent the past twenty years in the financial analysis, investment and banking industries. Dave is an adjunct professor in the business program at Texas Lutheran University. Additionally, Dave is a director of Business Bank of Texas as well as the Chairman of the Finance and Investments Committee for the Brownson Children’s Home and is a member of the Executive Advisory Council at Texas Lutheran University. He resides in Victoria, Texas.
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