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I had a conversation with a prospective client yesterday telling me he wants preservation of principal with growth. And on top of that, he told me what stocks he wanted to own. (You know the names, I won’t bore you.) “Because I don’t like to lose money,” he said.
In my over 25-years working in the investment business, I have yet to meet someone who “likes” losing money. It’s not a “well he can afford to lose some money” thing either. Losing money is losing money. No one likes to be a loser. Period.
On a separate note, I had a real nice conversation with another prospective client earlier this week. We talked for about an hour. He told me about his family farm, and how he and his wife do most of the work themselves. We talked about their family, saving money when there wasn’t any to spare, doing without, and the overall state of the world. At which point he said, “And I haven’t even told what investments we own.”
“You don’t need to,” I responded.
Action Line: Sometimes, the key to investing is understanding who you are and not so much where the market is. And finding someone who understands that is easier said than done.
My father in law Richard Young writes about the Prudent Man here:
The Prudent Man Rule is based on common law stemming from the 1830 Massachusetts court formulation Harvard College v. Amory. The Prudent Man Rule directs trustees “to observe how men of prudence, discretion and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income, as well as the probable safety of the capital invested.”
Since I started our family investment management firm in 1989, I have operated under the assumption that the Prudent Man Rule to this day carries as much weight as it did in 1830. Common sense and prudence just don’t go out of style—ever.
Originally posted on Your Survival Guy.
