Wednesday, July 16, 1997
The Trouble with
Wish Lists
by
[email protected]
Like many a Fool, I have enjoyed some (albeit limited) success with my investments. Also like most Fools, I can trace back through the relatively short history of my involvement in the stock market and recall various and sundry key decisions which proved vital in guiding the status of my fiscal well-being. What Fool among us cannot lament missing that certain stock, only to watch it grow tremendously. Or similarly, show me a Fool that has never sold so-and-so stock as part of an exceedingly "brilliant" move, only to see it shoot up in the following weeks! We have all been on the outside looking in at some time or another.
But let me give my fellow Fools their due. For just as many Fools, including this one, have also made enough right moves to have squeezed out some pretty respectable returns. As one who reads the Fool regularly is frequently reminded, most of our "decisions" serve only to decrease our overall returns and we'd all be better off leaving things alone. I won't go into all the details of why we Fools behave as we do, but suffice it to say that we simply cannot do that! Few of us, it seems can just buy the Foolish four and sit back and relax!
One little exercise that I have engaged in -- and that I feel many a Fool has probably joined me in -- is the use of "experimental" or "wish-list" portfolios. These are little (or not so little) portfolios that many of us have constructed (mine is online) with imaginary money just to test our own instincts or genius or whatever you Fools like to call it. Like many of you who are reading this have likely found, it is not enough simply to follow my own little boring portfolio. So I have taken to devising a sort of "fantasy" portfolio made up of stocks that I'd like to have bought had I only had the cash (and the nerve) with which to do so. I think it gives us some kind of added satisfaction seeing how rich we might have been. The trouble with these imaginary portfolios is that they always seem to do better than the real McCoy!
Now as I mentioned above, my real-life returns have been perfectly respectable. Clearly, when compared to my earnings just a few years ago when my savings were wallowing away in a local bank, my returns are stellar! I should be very pleased with my first few years "in the market" because I have outperformed many professional money managers and advisors (you know, all those WISE ones). Trouble is, with just a click of my computer I can bring up that specter, the portfolio that might have been, that darned concoction of stocks that were all "bought" with so much less thought, consternation, and anxiety than the real ones. Thus I can so very easily take my seemingly respectable returns, and make them look bad!
I therefore implore you, fellow Fools, to abandon the frivolity of your fantasy portfolios! For we all know the ultimate danger of them is that we will become so enchanted by our imaginary riches that we'll be enticed to buy them for real, and we all know what that will lead to!