My name is Jessica Weaver, and I am a financial advisor who also has a weak spot for fashion. During my lunch break one day, I ran over to Home Goods, my dog needed a new bed, and of course I ended up spending too much money on gourmet pasta and candles. On my drive back to the office, I was thinking about how we women tend to think similarly about finances and fashion. Usually it's not on purpose, but I've noticed some patterns. There are some opposing patterns as well, but I'll get into that later. I'm always trying to make investing and financial planning more interesting to get my clients more involved with their investments and financial goals. And because of that, this is my attempt at merging the fashion world with the investment world. This is my first of six posts linking fashion and finance, so grab a glass of wine or a martini, and I hope enjoy…
Have you ever looked in your closet and shaken your head at all the clothes you have but can’t seem to get rid of? My husband yells at me daily about this problem I have of not letting go of my beloved clothes. There are those shoes you never wear, but keep thinking that one time you’ll rock them when you wear a yellow dress. Problem is you don't even have anything yellow, so you'll probably never wear them, ever. All the organizational books tell you to get rid of anything you haven't worn in a six months or a year, but there are some pieces we just can't seem to get rid of.
I've noticed this same thinking with my clients and their investments. It usually is when I meet with someone new. They explain how much they want to keep a stock or mutual fund because they’ve owned it for such a long time. Problem is they don't know what the cost of owning it is or the actual performance of it since they've owned it. Some have a story that they were gifted the stock on their wedding day or they used to work for the company. I always find this one a little strange when they were just laid off by that same company, but still want to keep the stock. This idea of keeping something because you have an emotional attachment to it can be harmful to your financial goals.
I know an advisor who worked with a woman, and she was gifted Wachovia stock on her wedding day. She obviously had quite an attachment to the stock. Well we all know the rest of that story, Wachovia was bought in 2008 for $7 a share, far from its stock price high of $101.43 in July of 1997 before the stock split. Her advisor at the time explained why she should diversify the stock several times, and he rationalized that the company isn't doing well during the financial crisis of 2008. She wanted to keep the stock to give to her children and grandchildren, a very sweet and respectable thing to do. Unfortunately, the company is no longer around, and she lost hundreds of thousands of dollars. Now this is a more severe story, but it gives you an idea of how detrimental it can be to hold onto something just for the emotional tie you have to it. More often, people just want to hold on to an investment because they’ve held it for ten or so years.
Now you shouldn’t get rid of everything, the security could be the Michael Kors of the investment world, and you shouldn’t just sell it because you’ve owned it for a while. You should always consider how the investment has done compared to its peer group, and the cost of owning this stock or bond. Calculate if you will have a taxable gain on the investment or not. If you have a huge gain on the investment, see if you have other things you can sell to help even out the gain. If an investor has a capital loss from an investment in one year, you may be able to use that loss to offset your capital gain. A financial advisor or accountant can help you figure out your tax liability, which I recommend doing before you sell anything.
If you look at your closet, and there is no room for new and better quality clothes, then you can never upgrade it. You need to refresh your closet from time to time just like you should reevaluate your portfolio quarterly, semi-annually, or annually. I wouldn’t recommend putting it in cruise control, and putting your head in the sand like an ostrich. You may look one day and be shocked you are nowhere near where you thought you’d be.
Jessica Weaver, CFP®, CDFA™, CFS®
Any information provided in this email has been prepared from sources believed to be reliable, but is not guaranteed by Raymond James Financial Services and is not a complete summary or statement of all available data necessary for making an investment decision. Any information provided is for informational purposes only and does not constitute a recommendation. Raymond James Financial Services and its employees may own options, rights or warrants to purchase any of the securities mentioned in email. This email is intended only for the person or entity to which it is addressed and may contain confidential and/or privileged material. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon, this information by persons or entities other than the intended recipient is prohibited. If you received this message in error, please contact the sender immediately and delete the material from your computer
1. A stock split is when a company divides its existing shares into multiple shares to lower the price per share or raise the price per share. In this case with Wachovia, it was a two for one stock split, so the price went from $101.4375 to $50.718. https://www.wellsfargo.com/about/investor-relations/stock-price-and-dividends/wachovia/
 Changes in tax law may occur at any time and could have a substantial impact upon each person’s situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of Raymond James we are not qualified to render advice on tax or legal matters.