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Victoria, TX 77901

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Greed, Envy & Goals

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

Apple’s stock was up more than 50% this year, but Phillip had sold out. He missed out on the recent run and was nursing a bad case of seller’s remorse. It did not 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 dominos.

Finally, we stopped to take a break. Although I knew the answer, I asked Phillip why he sold his Apple stock.

He thought for a moment and recalled that he used some of the proceeds to pay his daughters 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 a buy or sell decision, or thought about making a buy or sell decision, he should 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 UnderArmor 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 UnderArmor 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 domino’s, 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 for 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.

Lastly, successful investing and financial management are predicated upon discipline--not finding some superstar stock.

Dave Sather is a Certified Financial Plannerand owner of Sather Financial Group. His column, Money Matters, publishes every other week.