(image from CNBC)
Are you emotionally attached to any of your investments? I am. While I watch my various funds go up and down (mostly down these days) I am bothered or elated about movement in my alternative energy index fund more than anything else. I realize that attachment is due to my strong feelings about alternative energy and the environment. I also know that it makes no financial sense at all. In fact, I know it is counterproductive to a good investing strategy. If I’m that attached to any particular investment, will I be able to dump it when I should? One part of me is even tempted to cut the cord now and get rid of it just because I’m so attached to it. I’m not actually going to do that because I believe, for the time being anyway, that it is a good investment. I just need to shake my affection for it!
Stocks that people receive as a gift from a beloved relative are frequently the subject of an emotional attachment. We love the giver and so we hang on to the gift even if it would behoove us to sell it off. Our homes are another common focus. We buy homes based on our heart and we frequently hang on to them for the same reason. Stocks obviously aren’t in quite the same league as a house when it comes to selling but the principal is the same. If we are emotionally attached to our investments, our judgment will be clouded when it comes time to sell and we may hang on too long.
When each of my brothers and sisters graduated from college we were gifted with some shares in the company where my father worked. In addition to being General Counsel he was also the corporate secretary and, as such, his signature was on the stock certificate. Double whammy! We were told not to feel like we had to hang on to the stock for familial reasons and should sell it when we needed or wanted to.
A few years after I received my stock I took up scuba diving and needed some way to fund that expensive hobby. I put in a sell order and was lucky enough to sell my stock at a good price. My parents were happy that I sold my stock to buy something I wanted and which I could never have bought otherwise. Most importantly, once sold, I never checked the price of that stock again! Many, many years have passed since then and I haven’t been diving in a long time. Now all the equipment is on my list of things to sell on eBay. I’ll be lucky if I get ten cents on the dollar for it but, had I held on to the stock, that’s probably about what it would be worth today!
Are you emotionally attached to any of your investments? Have you taken a hit because of it?
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2 comments:
Well, I think it's become a common sense that people get attached to things. Personally, I'm trying to develop a sense of principle-centeredness. Because most of us are either family/social/money -centered. Currently I'm digging into a belief that being Principle-Centered is what life all about..
Maybe if you keep an eye on my humble Blog, I'm most likely to write about this...
Regards,
Mustafa
For me one of the most difficult money concepts to get into my head is that a house is an investment. My ex- and I were both in love with our beautiful 1929 Spanish Mission Revival house, which we bought a year after we married.
While the house was spectacular and irreplaceable, the neighborhood was untenable for raising a child. We should have sold and moved the minute I got pregnant. Instead, we spent $20,000 (a LOT of money thirty years ago) adding on to the house, because we convinced ourselves we couldn't find anything we liked as much.
By the time our son was five, it was clear we couldn't stay there: he and his little friend down the street could not play outdoors without me or our friend's housekeeper physically standing there and watching over them every moment. An elderly neighbor was killed by an ax murderer, a cat burglar entered our home in the wee hours and had to be chased out by our German shepherd, one of the homeless mentally ill murdered a legal secretary in a law office a half-mile from our house, other homeless people would sleep in your car if you left it unlocked and used the side yards for their toilets, the public school was unsafe for children who did not carry a knife or a club with them...it was just ungodly.
So after having spent all that money in an effort to stay in the house we loved, we ended up having to sell and move to a safer area with better schools, anyway.
That said, I hated the house we moved into and didn't much like the neighborhood (we had many friends downtown; uptown, neighbors don't speak to each other). My husband, however, liked the house, and when I asked that we look at another place (coincidentally in the pricier part of the very neighborhood where I'm now living), he refused to consider it. I've always thought of the unhappiness I felt in that place as a contributing factor to our divorce.
You really shouldn't conflate "home" with "house." Home is where you hang your hat. A house is something you invest in. :-)
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