Big Hat, No Cattle

Waiting for the storm to arrive in Hemet, California on Wednesday evening… Same view of Diamond Lake, California, twenty minutes later Recently John and I listened to  The Dave Ramsey Show. “Dave Ramsey is an American financial author, radio host, television personality, and motivational speaker. His show and writings strongly focus on encouraging people to get out of debt.” (Wikipedia) His program reminded me of a post I wrote in 2012, one year after retiring. It was an attempt to give a heads up to the kids about the do’s and don’ts of investing. Although I updated the pictures and the text, the bones of the post remains the same as we are still fortunate enough to be on the road. Me, John, Matt, Ash, and Andrew

Dear Matt, Andrew and Ash,

You are at that point in your lives where you are successfully pursuing your careers, off your parents’ payroll (hopefully), almost finished repaying loans to us (Not you Ash!) and in a position to think about what to do with your savings.

So, I thought I would pass on some obvious and not so obvious do’s and don’ts of investing.

#1) Don’t consume alcohol while working on your accounts. Save it for later, because this one time, while we were living in Japan…

Shelley: I’m going to check to see if we bought the stock I bid on last night…. Hmmm. That’s funny. Under cash it says negative $75,000. I wonder what they mean by that? I’ll just go to the “Activity Section” and check.

Oh my God.

Oh. My. Dear. God!

Last night, while I was having a glass of red wine or two, I put in an order for $100,000 instead of $10,000. And the transaction went through. Oh God. Oh dear Jesus. I was thinking in Japanese Yen. I added another zero. But how is it possible I bought $100,000 worth of stock when I didn’t have $100,000? Oh no. John, what are we going to do?

John: We’re going to hope that it goes up, really fast. Don’t worry.

Shelley: That’s all you can say?

“Let’s hope it goes up. Don’t worry.”

Are you kidding me? I need to phone RBC. Now. Oh. No. I can’t. They’re closed. I’m going to have to wait until 4:30 in the morning. I’m sweating. My whole body is wet. There’s sweat running off my eye lashes. I think I’m going to be sick.

Ak. Ak. Ak.

John: Drink?

Matt, Andrew and Ash, this is called “buying stock on margin.” 

#2) Do your homework before making any financial decisions (placing your money in savings accounts, real estate, bonds, stock, etfs, your husband’s trousers …) and continue to educate yourself.
That means talk to professional investors, grandpa, watch BNN, read books, articles, blogs.

#3) Don’t use investment strategies you don’t understand.
I still don’t understand what selling short means, despite Grandpa trying to explain it, the good folks from RBC trying to explain it and investment advisors trying to explain it. So, I don’t do it.

#4) Do use your teabags more than once. You would not believe how much money that will save you. Kidding! Who wants weak watered down tea? That’s Uncle Spencer’s advice.

#5) Don’t invest in anything that makes you uncomfortable.
In other words, figure out what your risk tolerance is and invest accordingly. GIC’s are pretty low right now, but you’ll sleep well at night. And, if we had bought them 12 years ago, instead of believing we would average 6% per year from the long list of financial advisors we’ve hired and fired, we would have the same bottom line as we do now, but without the night sweats. Go figure.

#6) Don’t believe that blue chip stocks are 100% risk free. 

We bought BP and two weeks later…

(Wikimedia)

#7) Don’t take research advice too literally. 

A few years back, Apple was priced at $90. Analysts recommended a buy at $89. We didn’t buy. It’s now worth around $700 per share.

#8) Don’t check E-mail, Facebook, Blogs and other accounts while investing. 

Multi tasking while investing died a death when the following took place…

RBC Rep.: Mrs. Smith, did you just place an order with RBC?

Shelley: I sure did. Did I buy it?

RBC Rep.: Your order was to sell. That might be a little difficult as you don’t own any of that particular stock.

#9) And to piggy back on #8, no talking on the phone, on Skype or face to face with others while purchasing or selling. Focus.

Just last week…
Grandpa (Roy): I’m going to put a buy in at 24.

Shelley: I like that stock too. Let’s see who can get it first.

Grandpa: Ha! You better not buy it before me. You’ll drive up the price.

Shelley: Ha! Ha! Ha! I just bought it.

Grandpa: No! Wait. It’s OK, I got in at 24.

Shelley:That’s because I just bought the wrong preferred.

#10) And as Dave Ramsey said, don’t lead a “big hat, no cattle” life.

If you can’t afford it, don’t buy it. You’ll just look silly. And being in debt is not fun.

Love,
Mom and Dadxoxoxox

PS: If anyone else out there has more advice for these young ones, pass it on!

Dec. 19th – Feb. 28th, 2014

Day 187, Feb. 28th, 2014

Shelley and John