In 60 plus years of this life, I have learned a few things. Some things work. Some things do not work, or they do not work well. It is a great idea to try to learn the difference between those as soon as possible. It is also a wonderful trait to be able to gain wisdom from the experience of others so that you do not have to make all the errors yourself in order to know which things do not work.
Another fact of life is that I cannot change any event that happened even one second in the past. I can learn from it and hopefully do. I made one financial error—building a bigger, more expensive house than I should have at the time—that probably took me 20 years from which to recover.
Based upon these two major truths, I have developed an acronym for myself, WTNRTTD. It is a question, What’s the next right thing to do? If you like it better, you can substitute the word, Wise, for Right.
Part of human nature is to continue to punish ourselves long after a mistake or painful experience, one of the things that did not work or work out well. Many times in consultation with clients, they will bring up these memories. I always suggest they try to let those go, give themselves permission if necessary, and re-frame the question to something like this. Knowing everything I now know, painful as it may be, what’s the next right thing to do?
By now, you are asking yourself, why is this on the business page? Has Finke lost his uncertain way?!
Many times the things that did not work in our lives either were financial decisions or had drastic repercussions such as the one I mentioned above. I could have let that one decision in 1986 ruin my attitude and therefore my life, but thankfully, I was able to move on, to another wonderful house that we really liked, and life went on rather well.
I find this applies to even investing decisions. Let’s suppose that you bought GE stock at $36 in the spring of 2008 because it is a good company and it was down from its high of $42 in late 2007. Then it fell all the way to $5.73 in early 2009.
You could have sold it many days since then at a higher price, but you might have said to yourself, “When it gets back to $36, I will sell it.” That is extremely common to hear investors say. But even now it is less than $32.
This is why it is a great rule of thumb never to allow a loss to grow larger than 8-10 percent. It is now 400 plus percent higher than it was in March of 2009, but you still would not have a profit. Great opportunities are all around you. You do not have to carry a stock with you the rest of your life in the fashion I vaguely remember about the albatross around some poor devil’s neck in a classic novel I read in school.
Let it go. What’s the next right thing to do? How can you safely make more money in a reasonably short amount of time?
(Past performance is no guarantee of future results. Advice is intended to be general in nature. Statistics from Worden Brothers, Inc., TC2000 software, 2016. Stewardship Capital owns no GE.)