You have probably seen statistics that over decades of time, the general stock market rises by an amazing percentage, but average investors experience mediocre or even poor results. Vats of ink—in the old days at least—have been invested in writing about the reasons for this anomaly. Today there is a sub-section of study called Behavioral Finance to explore it.

Most of the material I have read deal with our cognitive biases and our emotional intelligence. One of these that seems fairly complete may be found at https://www.investopedia. com/articles/investing/060513/avoid-these-common-investing-psychology-traps.asp.

While it is good to learn about how and why we engage in behaviors that ultimately cost us money, I find it more practical to focus upon actual forms of decisions I have witnessed (and undoubtedly engaged in myself) as examples of what to avoid. I will continue to wonder why I run my mouth so much, but it is much simpler just to try to keep it shut as often as possible!

Let’s look at a few examples. These will be in no particular order of importance.

First, I will use the example of the great behemoth of General Electric. I recall a widow I worked for who had a legacy holding with her late husband in it. Forty years ago, GE (adjusted for all stock splits), sold at a low of $9.57. By August, 2000, it reached $291.09. While I was serving her, it was less than half that price, but she knew in her heart that it would be returning to those heights. In 2009 and again in 2020, it fell to less than $27.50.

She has gone on to her eternal life now, but GE is still priced less than half of its 2000 high. But often I have heard clients reason that they will sell a stock whenever it gets back to their buy price.

There is never any guarantee that a stock will return to its once-upon-a-time value, especially not in our lifetimes. The Time Value of Money concept needs to be far more important in your investing. If money is not growing, it is unproductive and may as well be buried in the ground as the wicked servant did from the parable. As my great mentor, Elmo Murray Wright, CPA, often said, Never fall in love with anything that cannot love you back.

Second, expect bubbles and bubbles to be popped. While it has been true that buying and holding many investments for decades will usually be successful, we can never know when our investing lives will be finished. Many of us alive today unfortunately have not saved as we should have. We need all we can get.

I have one client who has his mortality in mind and reaping profits more quickly is therefore his goal. That can be taken to an extreme I am sure, but I recall my Father often saying, You will never go broke taking your profits!

My final example is thinking that you have missed out on the world’s greatest opportunity, no matter what company you regard. I remember one of my clients thinking that there will never be another stock like Apple (AAPL). While it has risen by over 200,000 percent since its low of 1985 (6 cents adjusted for splits), there is always another great idea turned into a company that will grow geometrically in value over time.

Since I cannot do anything about what I did not do in 1985, or yesterday for that matter, the best question is always, Knowing what I know now, what is the next right or wise thing to do? It is always at best an educational guess, but fortunately we can learn from our mistakes.


(Past performance is no guarantee of future results. The advice is general in nature and not intended for specific situations)


(Statistics from Worden Brothers, Inc., TC2000 software, 2024)