So even though it’s tempting, I strongly encourage you to judge the investment advice you receive based on the validity of the principle (process) and not the outcome. Let me share a story about a friend who had stock in his grandmother’s mining company. Over time, the family had invested and lost millions trying to keep the business afloat. As you might imagine, the family stories around the business made it seem like a sacred thing to protect, regardless of the cost.
At this point, the stock had reached a low of $2 a share and my friend didn’t know what to do. He worried that if he sold the stock, then it might recover and his family would regret the sale and wish they’d kept it. I acknowledged that if he sold the stock and it doubled or tripled—which was a real possibility—he’d feel badly. But the catch was that if he kept the stock and it went to zero, he’d feel much, much worse.
The underlying factor was that he needed to make a decision based on a principle (e.g., did owning this stock support his long-term goals?) instead of the emotion and family lore surrounding the stock. There’s no guarantee that good investment decisions won’t lead to a painful result. But we need to remain committed to making good decisions based on sound principles and not just luck or emotions.
This article is
written by one of our senior advisors, Robert W. Hanson Jr., CFP, MS. Bob is a graduate
of DePaul University's College of Commerce, and is a board Certified Financial
Planner, (CFP). He also found time to earn a Masters of Science Degree in
Financial Services from the College for Financial Planning in 2003. Bob
has also taught investments at Northwestern University to students in the
school for Continuing Studies.
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