Thursday, April 17, 2008

Never Fall in Love

“What do you get when you fall in love?
A guy with a pin to burst your bubble,
That's what you get for all your trouble,
I'll never fall in love again,
I'll never fall in love again.”

- Dionne Warwick (“Never Fall In Love Again” by Burt Bacharach)

How many times have you heard the expression “I fell in love with it / him / her / them”? Or how about “I couldn’t help myself – I fell in love”? Like my kids used to say, “Like infinity times, Dad”.

Falling in love should only apply to people. When someone falls in love with an investment, they are headed for nothing but “pain and sorrow”. Love affairs are only for the heart, not the wallet. Of course, human beings are imperfect and they frequently attach their emotions to physical objects and intangibles like investments.

See if any of the following sound familiar: “I love that stock!”, “I would never sell that stock.”, “I know that company.”, “I work/ed for that company – I know what’s going on.”, “I know the markets.”, “I know where this is going.” Conviction in the face of uncertainty is a sign of character, but conviction based on nothing but “love” is a sign of cluelessness.

Don’t get me wrong, I want my investments to go up in value as much as the next guy. But I’ve learned – sometimes the hard way – to divorce how I feel about an investment from the decision to buy or sell that investment. I have become indifferent to the specific investment of my money by focusing on two things: “Are the costs of buying, owning and selling reasonable?” and “Does this fit or not fit into my overall allocation plan?”. Of course, once in a while I will take a flyer on something just for the hell of it, but in those cases I am acting with intention i.e., I know I’m taking a flyer and deliberately choose to do so.

Loving an investment is unrequited. The investment will never love you back. It’s a one-way street and no matter how fervent your love, the investment is not going to drive down the street the wrong way to meet you.

Act with intention and leave the emotion out of it.

Questions? kimm@sweetwaterinv.com

(complete lyrics here: http://www.lyricsmode.com/lyrics/b/burt_bacharach/ill_never_fall_in_love_again.html)

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