 |
|
|
|
|
Point of View
Free advice from friends can be costly
By Carl Heintze
The other day I got a long email from my stockbroker telling me not to worry. Everything is going to be all right. It was the first email I've ever gotten from my stockbroker. So, naturally, I started to worry. When stockbrokers tell people not worry--so it seems to me--it's time to worry, for sure.
Fortunately, we don't own much stock so I didn't worry much. But I am heeding his advice: Stay in the market for the long haul. He estimates the long haul to be three to five years. I didn't tell him, but for me a haul of three to five years is, indeed, pretty long. I may haul off before the market's long haul hauls in.
But I'm still not worried. That's partly because I know I can't take it with me. Partly it's also because any ups and downs in the market aren't going to make much difference in how I live.
I have lots of friends and relatives these days though who are wandering around with long looks. They had a lot in the market and now they have a lot less.
They are the same people who, a few months ago, were telling me that now was the time to buy. Advice like that always makes me suspicious. When your friends and relatives start telling you how you are missing the Big Money, the market has reached the point where trouble is not far ahead.
I give you this financial advice for free. You can take it or leave it. All I can say is, it's worked for me.
In my limited experience with stocks there are two danger signals: a broker who is afraid everyone is going south, taking him or her with him; and friends and relatives who never had it so good, who are so euphoric they want you to share in their good fortune.
In this case, sharing is not necessarily good. It means they are getting nervous. They want you to make them feel they are doing the right thing by doing the same thing. Resist this temptation.
Write those rules down and post it over your computer. They'll get you through the long haul or maybe even the short one.
Generally speaking, of course, stockbrokers don't care whether the market goes up or down. Their income comes from commissions on sales and it doesn't matter to them whether people are buying or selling, just so they are doing one or the other. Presumably their commissions will be larger when stocks cost more and less when they don't.
On the other hand, they will be nonexistent when there are neither purchases or sales. What they don't like is a stagnant market.
I gather the present market is not stagnant. It is not going up much, though, and that's what most stockholders want. They want a larger and larger return for their investment. Or, as some would have it, something for nothing, risk-free.
The brokers don't necessarily care about risks. They want the jingle of ever increasing commissions. This kind of bull market seems filled with Monopoly money. It's not real cash. It's play money. It's like having money somewhere in cyberspace. It shows up on the computer, but it doesn't really exist.
Try and spend it, and you either have to pay a big capital gains tax, or you're one of those causing the market to drop.
I know this is the wrong attitude. But for much of my life I have been bound to a rule given me by an old friend a long time ago, "You never get anything for nothing. Everything you get, you have to pay for."
Over the years I have found this to be mostly true not only about money, but life in general. Good days are balanced by bad ones and bad ones by good ones. Life has sweetness, but it also can be sour. Or, as Charles Dickens wrote: "It was the best of times, it was the worst of times."
You make money, but you sometimes have to lose it. The more risks you take, the more you are liable to lose--and so on. Brokers call this general trend the business cycle and it seems to be as constant as my friends and relatives' certainty that they've hit the jackpot.
The big problem is the cycle, while predictable, is not all that predictable and therein lies the problem. You're just never sure whether you're ahead of the wave or behind it.
Of course, none of this homey philosophy is going to make you feel good if you've lost big in the market.
And although I know you'll hate me for it, let me add that things will get better. The cycle will cycle. Stocks will go up.
In the long haul, of course.
|
|
|
|
Saratoga, California Since 1955
