Blessed by the Potato

Out in the blogosphere (blagonet), a bunch of people are describing their financial mistakes and entering a contest by Canadian Capitalist.

I have several mistakes to talk about. Most recently, I was locked in indecision about what to do about a car. Mine had been stolen (twice!), had just had an expensive round of repairs, and was making funny noises. I had a significant amount of “negative affect” every time I drove it: knowing that it had been stolen, cosmetically damaged, and who knows what else was done to it, it just didn’t feel like my car any more. I spent a ton of time researching what to get next (you all know how that ends: Prius). At the same time, some of the income trusts I owned were bought out, and I found myself with some cash instead of stocks. I also got a scholarship, but managed to live as though I didn’t (for at least a few months), and saved up some more money. All of that cash went and sat in a PC Financial high interest savings account so I could get access to it on a moment’s notice in case I needed it for the down payment on a new (or new-to-me) car. To sell my car, I had to detail it, and once I detailed it I reclaimed it to a large extent. It became much easier to forget it had been stolen when there weren’t someone else’s muddy boot prints on the dash, etc. The noises, while worrisome, stopped getting any worse and just kind of plateaued. I came to realize that I didn’t need a new car, and that my old one probably still had a few more years of life in it. While I had sunk in more repairs than it was probably worth, that money was already sunk, and if I could go even a year before the next repair, I’d probably still come out ahead of the cost of buying a new one.

This was a very slow realization, and that whole time — over a year — my down payment sat as cash. That money, which to me is a substantial fraction of my savings, could have been working much harder for me if it was invested a bit better, though I did at least have enough sense to get a 4% return on it over that time. In fact, with the recent market chaos sitting on cash probably worked out to be a good thing. However, that was a serendipitous event. I didn’t even put in a tenth of the effort determining what to do with that money as I did researching which new car to get. Maybe I would have done the research and concluded to keep a cash reserve, or to keep that portion of my savings in a safe, low income place, but I never gave myself the opportunity to make that decision with eyes open. I just let it happen.

Surebeam was another mistake. That one goes a fair bit differently: my dad first came to me with this stock, and he thought the financial side looked good, but wanted my biophysicist opinion on whether their technology would work or not. I thought it would, but might have problems finding a market with so many people afraid of the N and R words (nuclear and radiation). We both invested fairly early on. We set price targets for it, and were on our way. It actually went up for a while. Went up impressively, and hit my sell target within a year or so. Of course, I didn’t bother to check up on my portfolio for a month or so, and then was out of the country and calling home to my dad when I found out. I didn’t trust the public internet computer in the hotel’s lobby, so I waited until I got home to sell. Then I had to unpack and catch up on some work (*cough* and regain my position on the Warcraft III ladder *cough*), and it was about a week or so before I bothered to check back in with Surebeam. It had settled a bit from its peak, and I figured I would wait and surely it would go back up… and the next thing I knew the company was delisted, bankrupt, and my investment was worth nothing. There’s plenty of blame to spread around for that loss, including the management.

The careful reader will also notice that here things could have been saved if I had just put the time and effort into keeping on top of my portfolio. Or if I had taken a chance on a public computer. Or had the good sense to put in a standing sell order for my price target, especially before leaving for vacation.

To say that I’m an amateur investor, or that it’s a hobby of mine is to vastly overstate my case. I invest in the stock market because I was raised to believe that there are much greater returns to be had there than can be found in a savings account, GIC, or government bond. Because money should “work” for me. But I don’t put enough time and effort into staying on top of it, and that has been my financial mistake. There are tools out there to help people like me stay on top of things, and I’m working on checking the status of my portfolio (and any relevant news releases/columnist articles/etc) daily, or at the very least weekly. I’m also starting to look into potentially taking advantage of mutual funds, which can help keep me better diversified and will have managers to stay on top of things. What might be ironic is that I do take the time to set a monthly budget and every month or two I go over all my receipts and bills and make sure I’m staying on budget. Yet I have a pretty good natural instinct for that sort of day-to-day financial stuff and staying out of debt, so I might not even need to (or at least not spend quite so much time at it) — being a frugal university student for nearly a decade might have something to do with that.

So to sum up, take the time to stay on top of your money situation. If you simply can’t, find investments suited to a hands-off style.

Edit: Just to try to clarify, I do think that a mostly hands-off buy and hold, wait and see type strategy is generally good… but hands-off isn’t the same as brains-off :)