Age

I heard two stories this week with respect to investing in the stock market at this, can you say, VOLATILE time. One involved the friend of a colleague. This friend was able to put some money into Citigroup stock when it was around, let's simplify and say, about a dollar. It went to 3 or 4 dollars a short time later, allowing him to triple or quadruple his money, depending on when he exercised the sale. Ironically, my father had called me a few weeks before asking if he should put 500 dollars into Citigroup. I don't know if he ultimately did or didn't, but I had told him that the political risk had been too high and that I would not have touched the stock, even if the price was so cheap relative to "where everyone seems to think it should be." Had he invested, he too could have doubled or tripled his money. Had I been able to invest, it would appear that I would have missed out on an opportunity.

The other story concerned the other side of the coin. A buddy of mine had a friend working in Boston at an investment firm. He was a trader, involved on the equity side, and he had been doing well. Apparently, from the sound of it anyway, he had "earned" his opportunity to take a chunk of money, presumably part of a larger fund, and put it somewhere of his choosing. He chose AIG at $4.00. One word...OUCH!! Needless to say, he will now need to work his way back up to getting that opportunity again.

If one is to invest, especially in these markets at this point in time, feelings of regret such as this, either at trades taken or opportunities forgone, can and will be part of the experience. I saw an article today with an incredible quote reading, "Life can only be understood backwards, but it must be lived forwards." So often, we feel the need to extrapolate future potential based solely on the past. Citi stock is cheap...why? Look at where it was a year ago... We have all heard that statement. Maybe even the "everything is cheap right now." Maybe that's true, but, what it certainly doesn't mean is, "If I pick stocks at random, since they're so low right now, they have to go up. I have to make money." If 2008 teaches us anything and we choose to extrapolate past to future, take one thing. Nothing is certain. Nothing can't happen. Anything can go down to zero...it just happens much faster from 50 cents than it does from 50 dollars. Have a process, have a reason, and go deeper than a simple "because it's cheap right now." Over the longer-term, you'll be glad you did.