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The Omell Financial Group

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Rola Halabi-Day

March 21, 2024

Money Education Financial literacy Economy Good reads
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Investing is not Gambling

 

Dear Valued Client,

 

Last week, we had a conversation with someone who talked about investing using gambling terms in every comment. She talked about not being willing to go “all in” or to “bet it all on red” because she wasn’t willing to “lose the whole enchilada,” while her husband was willing to go “double or nothing.” She was always having to make him “take some off the table.”

 

As we talked, it struck us that many confuse investing with gambling. And that more than likely an owner of any other kind of equity, asset (i.e. art, jewelry, homes, business, and other types of real estate) would never discuss that asset in gambling terms. We’d never worry that we were “all in” with our home, even though it is one of the largest assets on our balance sheet. We’d never worry about “betting it all on red” when wearing an heirloom gold necklace we inherited from our grandmother, even with the wild fluctuations for the price of gold.

 

Self-scrutinizing investment decisions have become the nature of owning something that the value is reported on every day. When you own stocks or equities (which really amounts to owning businesses), the value of your assets and the general direction of the market for those investments are in the news every single day. And every single day, there is some kind of headline grasping for your attention to report that the value is up or down—with more emphasis on the down.

 

Sometimes, on any given day, there are multiple market headlines and reports designed to take us on emotional, high-stakes rollercoaster rides. Never mind reporting a key fact that the market trend for all of history has been up and down with an upward slant! In fact, checking the values of our equity assets has been turned into a game to see if we have won or lost. We check market news daily or weekly. We would never attempt to check on the value of our homes or other assets that often.

 

Let’s look at an example. Imagine you live in a town with a major military presence. In towns like that, the local military base has a tremendous economic impact on the community. If tomorrow’s headline announced the base was closing, all of the homes in the area would dramatically decrease in value. There would be no change to your home . . . no hole in the roof, no change in location, and no decrease in square footage, but bad market news would cause the value of your home to decrease. You may be disappointed, but at the end of the day, you might let the news go because you never intended to sell your home anyway. This is where you plan to live the rest of your days.

 

On the other hand, if two weeks later, the headline is that Federal Express® is relocating their headquarters to your town, every home in the area would increase in value! Your house wouldn’t be in a better location, or have increased square footage, but market news would have caused your home value to increase. Again, at the end of the day, this news, while good, would likely not cause you to make changes. This is your home and where you plan to live the rest of your days.

 

The same attitude should apply to our retirement portfolios. We own the investments we own based on our financial plan. The portfolio is designed to provide us with income all the rest of our days. Headlines can cause the value to go down and it can cause it to go up. But history has shown that the declines are temporary. But if the real reason we own the portfolio is to live from it for the rest of our days, and it continues to provide us that living, let’s ignore the daily pricing as we would with our homes.

 

Owning good things isn’t an all-or-nothing proposition. Owning good things is what we do to meet our long term goals.

 

Sincerely,

 

 

The Omell Financial Group

 

 

CIBC Private Wealth consists of services provided by CIBC and certain of its subsidiaries, including CIBC Wood Gundy, a division of CIBC World Markets Inc. The CIBC logo and “CIBC Private Wealth” are trademarks of CIBC, used under license. “Wood Gundy” is a registered trademark of CIBC World Markets Inc.

 

If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor

 

Sourced from Bill Good Letters Library

 

Original from Gorilla Rhonda Ferguson

 

© 2013 Bill Good Marketing, Inc. All rights reserved.

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CIBC Private Wealth” consists of services provided by CIBC and certain of its subsidiaries through CIBC Private Banking; CIBC Private Investment Counsel, a division of CIBC Asset Management Inc. (“CAM”); CIBC Trust Corporation; and CIBC Wood Gundy, a division of CIBC World Markets Inc. (“WMI”). CIBC Private Banking provides solutions from CIBC Investor Services Inc. (“ISI”), CAM and credit products. CIBC Private Wealth services are available to qualified individuals. Insurance services are only available through CIBC Wood Gundy Financial Services Inc. In Quebec, insurance services are only available through CIBC Wood Gundy Financial Services (Quebec) Inc.


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