by Marc Lichtenfeld, Advisory Panelist
“You think they’re your friends, but they’re not your friends.”
This was the frequent refrain from a landlord I had while in college. He was warning us on the danger of throwing parties and inviting people who we considered friends, but would think nothing of trashing the place.
I guess it’s not surprising that renting his house to college kids made him a little paranoid. He often showed up at random times to make sure there was no revelry taking place. Once, he chased away some of my buddies as we were watching “Monday Night Football” (I guess the keg in the corner didn’t help our argument).
This no-nonsense, unattached attitude is the perfect way to approach the stock market and your investments. After all, most investors have had stocks that we thought were our friends, but that ultimately turned on us and caused pain.
The trick is to not become emotionally attached to them.
This is easier said than done, so if you find yourself hanging onto stocks for too long, or investing more with hope and emotion than sound reasoning, allow me to give you some tips…
When it Comes to Emotions, Adopt DeNiro’s “Heat Mentality”
I was fortunate that my stock market education started at a trading desk, where we executed trades according to how the market and stocks were performing. Period. Nobody cared if the stock had a low P/E ratio… whether the company had the next great biotech drug… or was run by a terrific management team.
To us, stocks merely represented three or four letter symbols. That’s it. In some cases, I didn’t even know the names of the companies and couldn’t have told you much about their businesses.
Sounds a bit clinical, doesn’t it?
It was. And it served me well. I learned that you shouldn’t get emotional about stocks. They’re simply investment vehicles in which to park your money. Granted, you can be in a stock for five minutes or 20 years, but you should never form a relationship with them.
As Robert De Niro’s character said in the movie, “Heat”: “Don’t allow yourself to get attached to anything you cannot walk away from in 30 seconds flat if you feel the heat around the corner.”
Think about it. Many of us have owned a favorite stock – perhaps for years. Oftentimes, the longer you hold it, the more difficult it can become to sell it – even when you know you should.
We form an emotional attachment to the business that often has nothing to do with how the stock is performing – or how much money we’re losing from it.
