I am going to avoid singling out which child of mine this post is inspired by, mostly because I don’t want this post to be found 10 years from now and I’ll have to hear “What the heck Dad, why would you write that?!”
One fall night I decided to light a candle in our kitchen and place over the top a metal decorative witches hat that glowed a little spooky. The candle was pushed back far on the stovetop so that no one could bump it or easily reach. Along comes child X who is so intrigued that they stretch to try and pick up the hat. There’s a clang followed by a high pitched scream and child X comes sprinting to us as we rush towards them. Ice-Ice-All better. The end result was a little blister, a hard lesson learned, and the prompt removal of my decorative witches hat for the next 22 Halloweens.
Fast forward one week and we are roasting marshmallows and making s’mores. I had brought some sparklers with me and I thought the timing was good coming off of last week’s candle lesson. Instructions were made, warnings were given, sparklers were held with grown-ups, and after the last sparkler was out I hear child X say “Dad, I didn’t touch the sparkler” as they are holding their finger and one lone soldier of a tear is crawling down their cheek. I almost lit up like a sparkler as I tried to stay calm to listen that they had touched the sparkler, once the sparkle was gone. Ice-Ice-All better. The end result was just a little ouchy, another hard lesson relearned (maybe?), and the prompt removal of any sparklers for the next 22 campfires.
As a person and as a parent I kept stewing about how we ended up here again. People kept saying “that’s kids, they’ll learn, don’t worry.” I know deep down that they’re right. They will learn to look both ways before they cross the street, and not to touch an open flame, and many other common sense safety basics. Yet as I have continued to think about the lessons we learn as children, I wonder why as adults when it comes to some lessons, investing lessons and decisions especially, we are at times no more mature than child X testing the sparkler warmth. Year after year, studies show individual investors plowing new money into the parts of that market that have already appreciated dramatically, while simultaneously selling out of those parts that have lagged. “Why do we still own International, it hasn’t grown in years. Can we get rid of it?”
The investment landscape is historically painted with a few bright spots, a few gray spots and a few dark spots. It’s natural to want more of the bright, less of the gray and none of the dark. My job, the job of all advisors, is to keep you focused on the whole painting and why you need all the shades to work together to complete the picture. If you find yourself “repainting” your portfolio every time one fund loses money or falls out of favor, it might be time to put the brushes away and keep my sparklers and witches hat company.