Testing the waters
Whether you want to believe it or not, you and you alone ha’:re the best judgment when it comes to your money. Here’s a story about me and my mom:
A few years ago, I had a terrific hunch about a particular stock. I just knew it was a great buy, especially priced as it was at around $1.50 a share. So I told the person that I love most in the world, my mom. My mom has always lived really, really frugally and, since my dad died, has managed to have enough
to live comfortably on, but she has never been a great risk taker in the stock market; in fact, she still worries about me when I buy or sell stocks. This time, to my amazement—maybe she caught the excitement in my voice—she said she also wanted to invest in the stock I had chosen—$5,000. Eighty- three years old, and now she decides she wants to jump into the market!
Now—again to my amazement—I began to caution her. Did she understand that any stock that was selling for only $1.50 a share was totally speculative? Yes, yes, she understood that perfectly well. Did she understand that she could lose the entire $5,000? Yes, she understood. She felt the worst-case scenario was that if she lost it all, she would have $5,000 less to leave me when she died. Was I willing to take that risk? (I hate it when she outsmarts me at my own games.) I was willing, so my mom and I invested in the stock that same day, each of us putting in $5,000.
Everything was holding steady pretty much until a few months later, when the stock started to go down and down and down. My mom, who by now was really into this, began calling me up every day and saying, “What do you think we should do?” I would say the same thing I would have said to my clients, “What do you think you should do?” and, satisfied, she’d say, “Let’s just hold it.” That was how I felt, too, until the day the stock hit twelve cents a share, which made me begin to doubt my own inner voice. Five thousand dollars is a lot of money, and this was my very own mother.
That was the day she called up to say, “Let’s buy more.” I couldn’t believe it.
I said, “What did you say?” and she said, “I just have this instinct to buy more.”
When she said this, I’m sorry to say I did not encourage her to follow her instincts. Instead I said something to the effect of, “Mom, are you crazy? This stock is almost belly-up and we can’t throw good money after bad.” I’m also sorry to say that now she began to mistrust her own instincts as well and simply agreed with me. We left our money where it was, but our hopes fell and now we both trusted less in what we had believed about the stock.
To make a long story short,. the stock fluctuated between twelve and twenty-five cents a share for almost a year, then:
boom. It started to skyrocket, and soon after that we had both tripled our money. One day, while the stock was still at this high, my mom called again. “Suze,” she said, “I’ve decided that it’s time to sell.” This time Ididn’t stop her from listening to her inner voice. I said, “Go for it.” She made three times the money she put in, and she was perfectly happy about it.
Even so, my mom would have made ten times, not three times, her money if I hadn’t drowned out her inner voice and made her doubt what she knew to be true for her. If that spark of instinct had been guiding her actions, she would have been far better off than she was by letting my doubts get in her way.
The moral of the story is that—whether you want to believe it or not—you and you alone have the best judgment when it comes to your money. You must do what makes you feel safe, sound, comfortable. You must trust yourself more than you trust others, and your inner voice will tell you when it is time to take action.
I’m not in any way suggesting that if you take your nest egg and go out and find a speculative stock to invest it all in, you’ll get rich. You won’t. You’ll be a sitting duck if you do that. What is more, I doubt your inner voice would guide you in that direction anyway.
Nor am I suggesting that you shouldn’t listen to others or learn about what you’re planning to invest in. You need information to make good decisions. But your inner voice will help you weigh that information properly. What I am suggesting is that you test the waters before you jump in with everything you have and that you practice listening to that inner voice. As soon as you see how easy it is to stay afloat, and get used to the investing temperature, so to speak, you very well might want to go in deeper.
Tags: financial