We have seen many clients make the journey to become more effective investors with more productive attitudes, beliefs, and habits. We are proud of the client who made the longest journey of all. Because it has so much potential for so many others, we are telling the story of W, our client, in this series of three posts.
W reached a place in his career where he had money to invest in the late 1990’s. He consulted us about investing—but did not become a client then.
Our principles led us to conclude that the red-hot technology sector, which everybody seemed to be buying, should not be purchased. The bargains we preferred were incredibly boring to W. An annual dividend of a few percent was not appealing compared to the prospect of continued 30-40% gains from the shooting stars.
(Long-time followers will recognize our three principles in this episode: avoid stampedes in the market, find the biggest bargains, “own the orchard for the fruit crop.”)
After the wheels came off the technology boom and W lost half his money, he brought what was left of his portfolio to us.
Many victims of the massive decline that began in 2000 learned the wrong lesson. Although ‘old economy’ companies held their own or gained while tech stocks plummeted, some learned that “the stock market is dangerous.” The correct lesson, of course, is that popular but over-priced assets are dangerous.
W, to his credit, had learned the right lesson. He remembered the advice he did not take, saw how that would have worked, and became a client. Meanwhile, the people who learned the wrong lesson sold out and usually went on to repeat their mistake elsewhere.
This was the first leg of the journey of W, where it really began. But he was not an effective investor, yet. Two more lessons were needed, further along the path.
We’ll be writing about those next two lessons in the days ahead. If you just can’t wait to learn the rest of the story, or want to talk about your situation, please call or write.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
This is a hypothetical situation based on real life examples. Names and circumstances have been changed. To determine which investments or strategies may be appropriate for you, consult your financial advisor prior to investing.
Stock investing involves risk including loss of principal.
The payment of dividends is not guaranteed. Companies may reduce or eliminate the payment of dividends at any given time.