Emotional Attachment to Stocks

Let’s talk about emotional attachments to stocks. Maybe you’re an individual that knows someone who had a good friend or family member that worked at GM for a number of years. And maybe they had a significant amount of their retirement savings all in that one stock. And then not too long ago, we all witnessed what happend with GM and with a number of other companies out there. So it’s a lot of times we see there’s too much emotion involved with stocks. And if you put all of your money in one stock, maybe you received an inheritance or maybe a family member you know, gifted that money to you. Or maybe they worked for the company and so you feel this emotional attachment. I’ve had some clients here in northern Michigan that worked for AT&T for a number of years and sort of felt this emotional attachment to the stocks as they feel comfortable and confident with the company. But meanwhile we’ve seen over the past five years, that share price dropped by about 35%. And so it does pay over a 5% dividend, but it is one where there’s obviously risk involved having that one stock. Maybe you’re somebody that in the late ’90s with that dot.com bubble, you heard this hot tip on a stock. But with that, you maybe considered well, there’s no earnings with these companies. Sometimes you see the stock price go up, but there’s no earnings. And a lot of stocks at that time lost all or most of their value. So it sort of reminds a little bit today of people that are looking at the crypto currency world and trying to determine if they should shift a significant amount of assets that way. Again, we would encourage you to be very cautious with that and maybe it makes sense for a small portion of your overall savings, but it may be money that you’re willing to risk. And this is ultimately with stocks where earnings matter. As a general rule, the market trades at a multiple of earnings. Historically, this has been around 17 times. And so along with this, diversification is still the answer for your retirement plan. You want to be not solely focusing on one individual company that takes on a lot greater risk. And so you typically want to have a nice diversified portfolio. So I’m curious for you when you look at your retirement plan, how are you structured? Is that something you’ve recently reviewed that? Or would you be interested in getting a second opinion just to see how you’re structured? You know what percentage is in U.S. stocks versus international stocks? What percentage of your portfolio is in different bonds? Have you considered all the different types of accounts? Are you solely focused on the investment world or have you ever looked at what’s available in the insurance world? So a lot of different things to be considering and we’d offer again, a no cost, no obligation second opinion.