Joe was a hard working guy. He went to work every day, put in a good shift, got paid and bought his groceries. Joe had been taught by his father to pay the bills first, then save something and have fun or get by with what was left. So he did.He saved up over time, enough to look into the future and see retirement. Eventually, he saved enough that he felt he could use some help so he asked some friends and was referred to an adviser.
The adviser was what we might call a stock broker; someone who looks for stocks with a potential for gain. His adviser, Bill, was very aggressive and liked to pick out what he thought were up and coming mining stocks. Bill put together a portfolio of 10 stocks that he liked, recommended them to Joe and they went forward.
Things went slowly at first, then a few dropped substantially. You could say Joe was rattled. Bill convinced him to stay the course and another one started to go up and things seemed better when the whole mining sector fell apart. Joe was down more than 80 per cent. Joe melted down stopped using Bill but thought he would keep the stocks as they had gone down so much. After Joe had gone back to his original savings and 10 years had passed, a few of the stocks came back with the market and one actually went up 20 times. He sold it and he had doubled his money. You could say he was very happy.
Jill was working in a legal office when one of the partners was talking about a stock tip. When she asked him about it he told her he was going all in on this as it was a done deal and should easily triple. Jill called her adviser and told him to sell her holdings and put it all in this company. Six months later it seems they had bought at the high and the stock was trading in the pennies. Jill had lost her savings.
Andy was an engineer and, like most engineers, he was very logical and a little skeptical. Andy paid his bills and saved money. He worked with his adviser, built a comprehensive investment and financial plan and then followed the plan. Over his time, he heard about other people who had bought stocks and lost and some who had won. He stayed the course. His savings continued to grow and he found that if he could get seven per cent each year, his money would double every 10 years.
Our savers fall into what I will call three categories. The first, whether he knows it or not, was a logical speculator.Diversify your risks among a pool of stocks and your chances of success are greatly enhanced. The second was an irrational speculator. There are many things in this scenario that are wrong but mostly never bet all of your stake on one position.
Our last, however not sexy, is just someone who wants their money to grow, and with a little planning gets to a place that is free from worry and is financially independent.
Les Consenheim is a Financial Advisor with Raymond James Ltd. — Independent Financial Services and can be reached at 250-372-8117 or les.consenheim@raymondjames.ca. Raymond James Ltd. is a member of the Canadian Investor Protection Fund. This article is for general information purposes only. The views of the author do not necessarily reflect those of Raymond James. Individuals should seek professional advice prior to acting on information referred to herein.
