The Virtue of Staying Put

The psychological urge to move on is ingrained in the American character. As investors, this compulsion does us no favors when the stock market is hot and we chase the top performers, or when it’s plunging and we flee longstanding holdings.

Let’s explore the forces in our society that impel us to pack it in, or to stay put.

The stock market is always volatile to some degree. Values can drop due to events extraneous to a specific company or holding, and investors can and do lose money depending on when they buy or sell. But some of the all-time great value-oriented investors, a John Templeton or Warren Buffett, have been willing to hold a high conviction stock over long periods, riding out significant declines in value at times.

Let’s explore the forces in our society that impel us to pack it in, or to stay put.

The New York Times Magazine in February ran a column by Virginia Heffernan, titled “Should We Stay or Should We Go?” A commentary on changing trends in society reflected in movies, the piece offered philosophical precepts applicable to financial planning and investment strategies.

Since we are endowed by our creator with free will, and we are blessed to live in a relatively free society, when confronted with a challenge, we are free to accept it or reject it. When hit with new information, we can act on it or ignore it. We can stay or we can go.

Noting that Americans have always wanted to move up or move on to something else, Heffernan notes a significant number of films where one of the key lines was, “Let’s get out of here!” Such an exclamation, she says, “propels action. It justifies a change of scene … a passion for new vistas.”

But the exhortation may reflect something less noble, “an aggressive, adolescent disgust with the familiar, a ‘let’s leave’ signal that we are slipping the knot.” Where are we going? Who knows? “Anywhere but here.”

Citing recent movies, Heffernan spots a new trend, “opting to stay.” Staying put may reject an isolationist culture, perhaps expressing “a steadfast commitment to a cause, a family, or a discipline.”

Much in financial planning is rooted in devotion to family, which takes commitment, discipline, patience and maturity. When you marry and comingle finances and life choices, it takes commitment, even more so in the face of challenge. Not always, but sometimes, divorce may seem easier than staying put.

A 2004 study by Dick Sobsey at the University of Alberta indicated that parents of autistic children have an 80% divorce rate. A University of Buffalo study found that parents of a child with attention-deficit hyperactivity disorder are nearly twice as likely to divorce by the time the child is 8 years old. Planning for special needs children is an art, and can be helpful in relieving worry and pressure on parents.

“Let’s get outa here” suggests a search for instant gratification, an “I did not sign up for this” mentality. Conversely, most tomes on success point to stickiness in the form of patience, not giving up easily, persistence.

Any story about the building of a great company, a Home Depot or Apple, has at its core entrepreneurs and visionaries who did not give up when the going got tough. Any manager of a team has to keep people motivated and deal with those who become frustrated or bored when things do not come to fruition quickly.

In investing, there is a tendency to move on based on short-term results, when staying put often yields better results over time. Markets are volatile and volatility generates fear. Since human beings do not like the FUD factor – fear, uncertainty and doubt – guaranteed or low risk investments yield less than those that have more risk, including volatility. Wharton professor Jeremy Siegel, author of Stocks for the Long Run, observes, “Volatility scares enough people out of the market to generate superior returns for those that stay in.”

In the 1980s, a well-known financial magazine every year published a list of “mutual funds to buy now.” Each year, the funds touted were not the same as the year before. Investors who chase what is hot and who jump around, generally underperform.

We have seen great success with investors who picked a good fund, invested diligently, and stayed with it even in years of underperformance. Investors who put modest amounts into a stock or mutual fund they believed in have in some cases entered retirement 20 years later or more with an impressive nest egg.

Staying put can have its virtues.

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Lewis Walker, CFP, is president of Walker Capital Management, LCC in Peachtree Corners, Ga. Securities and certain advisory services offered through The Strategic Financial Alliance Inc. (SFA). Lewis Walker is a registered representative of The SFA, which is otherwise unaffiliated with Walker Capital Management. 770-441-2603. [email protected].

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