Updated: Sep 7, 2021
"The worst thing to happen to a gambler is to win, and
losing is pretty bad too."
~ Doug Guernsey
Walking through a casino, it's hard to not become distracted by everything around you. From the flashing lights with their bells and whistles to the exuberant cheers of the big winners, everything around you is designed to bewitch the mind and ensnare the senses. When they can make you feel like you're on top of the world and that you can't lose, that is when the house always wins.
Now, don't get me wrong. Playing cards is a fun pastime. I have a set of poker chips that we periodically pull out for family game night. We'll sit around the table with our chips and cards, making bets, and trying to out-bluff each other. At the end of the night, though, everybody goes all in on a blind round to see who the "lucky" winner is, emphasis on "luck." It's a fun way to end a game, but trust me, it is not a fun way to invest your money.
Let me give you an example. Back in October 2007, I met with an individual, let's call him "Steve," who came in to meet with me after attending one of our workshops. After going over his financial statements, I realized that Steve had all $350,000 of his 401(k) in a single stock. When I asked him about it, Steve assured me that it was fine. He said that he had worked for the company for many years and that he'd experienced a great return. When I tried to explain to him the dangers of heavily investing in one stock, and that he should diversify, he blew it off. After all, the stock was trading around $160 per share. He was "all in" and crushing it! He felt invincible!
At the end of December 2008, the stock had dropped to around $52 per share. In April 2010, the company was dealt a second blow by the Deepwater Horizon oil spill, also known as the BP oil spill, which occurred in the Gulf of Mexico. This incident is considered one of the largest oil spills in the world and is the largest environmental disaster in U.S. history. The drilling rig that exploded was owned by Transocean, the company he worked for. As of this writing, Transocean stock trades at around $4 per share.
I never saw Steve again after that initial meeting, but I can only imagine the devastation this investing experience must have caused him. To this day I think about how this must have affected his family, his retirement security, his relationships, and even the charitable causes he cares about. Steve could have gotten lucky, but he didn't. Putting all of your money in a single stock is a recipe for disaster. Diversify your portfolio. Stay disciplined over the long term. You're not playing with clay chips here, so do not gamble with your dreams.
Remember, never bet it all on black.
How to Avoid Confirmation Bias
by Mark Matson
Your portfolio is trying to tell you something. Are you listening?
It is amazing the number of investors whose risk tolerance does not align with their portfolio allocation. "I'm aggressive" or "I'm conservative" is no longer adequate or suitable in today's investing environment.
How much risk do you feel comfortable with? How much risk do you need to reach your goals? How much risk are you currently taking? Your portfolio is desperately trying to tell you this and much more. Are you listening?
To find your Risk Number, click the link below.
Investing Reimagined - Friday, March 13, 2020
Blue Wahoo's Baseball Season Opener - April 9, 2020 (call Sena McDaniel for ticket information)
Guernsey Sporting Clay Shoot - Friday, May 22, 2020
Be An Advocate
Do you want to empower families in discovering their True Purpose for Money?
Do you want to help equip others to defeat the Wall Street bullies?
Do you want to see families discover for themselves how investing works and to be left with the knowledge to make powerful choices for themself, their family, and their future?
If you answered yes to any of these questions, then you can be an advocate for those you love and care about.
Here's how simple it is:
1) Invite someone to join you at one of our upcoming events.
2) Forward this to someone you care about.
Most people will not pursue these things without someone like you advocating for them.