Fill ‘er Up, Please!Monday, October 27th, 2008 by Charles Mayfield, CFP®
Gas prices have been extremely high and unpredictable thus far in 2008. Several weeks ago I was travelling home from work. As I approached the gas station I pass nearly every day of my life, two things caught my eye. First, they actually had gas. Those of you that live in Atlanta certainly know of the recent supply issues we have been burdened with. However, what I was truly excited to see was the $3.35/gallon price that was proudly displayed on their roadside board. I looked at my tank…half full. Having been programmed for the last several months to pay nearly $4 for a tank of gas I decided to stop and fill up my tank. Besides, at that price, they might be out of gas tomorrow. Needless to say I went to sleep that night feeling great about my decision.
The next morning I rose to head to my morning workout and passed a different gas station. You can imagine the shock when the gas price was $2.95/gallon. Now here is where this gets interesting. I didn’t feel bad about my purchase the evening before. Frankly, I was quite pleased that I wasn’t paying the accustomed $4 per gallon. I ask you, if you had a 500 gallon gas tank in your car, would you have filled it up at $2.95 or how about today when I see gas for $2.53/gallon?
We tend to purchase things that appear to be relatively cheap compared to what we are used to. We clip coupons, shop on tax free weekends and rush department stores for clearance sales. Why? If there is perceived value in something, we buy it. Americans will buy 10 bottles of mouthwash if we think that we are saving money. Besides…we will use the mouthwash eventually, right? Why don’t we treat our investments the same way?
If anything is certain, it’s that someone is going to eventually use those dollars you are saving for retirement. Why do we take the opposite approach than when buying everything else? Would you throw away your old comfortable jeans that you have broken in for a new pair just because they are cheaper? NO. Keep investing. Stay the course. I’m not sure when or how it happened…but we have been programmed to act inappropriately (sell instead of buy) when markets are on the decline or uncertain. Do what most folks talk themselves out of…keep investing.
Do you remember the last time you bought something and saw it days later with a higher retail price? How good does it feel to negotiate that extra $1000 off the price of a new car? Try to call upon those feelings the next time you look at your investment account statements. “I’m getting such a discount”… or “I’m in this for the long haul.” Practice these affirmations.
Practice patience and common sense. Talk to your investment professional. If they can’t justify why they have you invested a certain way…then find a new one. Cass and I stand by the decisions we have made for our clients, and can justify every recommendation made, now more than ever. You should expect the same from your advisor.