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{ in·deed·a·bly }

adverb: to competently express interest, surprise, disbelief, or contempt

Sell

Finger poised over the sell button. Price ticker fluctuating, more erratic than a tweaker at a rave. Emotions in conflict. Butterflies in stomach. A trickle of sweat running down the protagonist’s brow.

Now?

Now?

Now!

Finger slams the sell button. Locking in the profits. Saving the day.

Cue the triumphant music. Celebratory high fives. Self-congratulatory back slapping. The conquering hero heads for the exit, surrounded by a token love interest and gang of trusty sidekicks.

Titles roll. Lights come up. The movie ends.

Over the years Hollywood has produced some entertaining dramatisations of high finance.

Wall Street. Margin Call. The Big Short. Boiler Room. Secret Of My Success. Wolf of Wall Street.

Each one telling the tale of an ambitious master of the universe’s rise, fall, and (sometimes) rise again.

TV shows like Billions, Devils, and Succession portray mildly exaggerated versions of the vast egos, absent ethics, dastardly deeds, and sheer luck involved in generating true alpha. Not performing the same backwards-looking financial analysis or faith-based technical analysis that amateur active investors undertake while trying to talk themselves into or out of a random investment position.

True alpha can’t be found in consuming the narrative, it comes from creating the narrative.

If you aren’t moving markets then you are a spectator, not a player. Speculating on what you hope may happen rather than investing in what you know will happen. Your returns nothing more than a financial participation trophy.   

While entertaining, reality is often a pale imitation of the adrenalin-fuelled skullduggery depicted on screen. The movies never mention all the real-world friction, delays, and human incompetence we endure.

Transaction fees. Some visible. Many hidden, such as unfavourable foreign exchange rates, buy-sell spreads, trailing commissions, and front running.

Taxes. When you make it. When you spend it. When you buy it. While you hold it. When you sell it.

Settlement periods and transfer windows measured in days for electronic transactions that take nanoseconds to complete. Systems inefficient by design. Traditions and compliance theatre masking that at their hearts those systems are built to enrich incumbents while dissuading interlopers.

Wealth carefully managed out of the client’s wallet and into the service provider’s pocket.

Our lived experience differs markedly from those cinematic portrayals. Hitting the sell button doesn’t produce fanfare or ticker-tape parades, but rather bland underwhelming on-screen acknowledgements. Perhaps followed by an emailed contract note.

The feeling isn’t nerve-wracking. No sweat on the brow or butterflies in the stomach. Merely “meh”.

Of course, for some of us, externalities may influence that feeling.

Social media “Chicken Littles” perpetuating self-reinforcing feedback loops that “the sky is falling”, or the euphoric hopes of a legion of Pollyanna’s promising that returns are heading “to the moon”. High on volume and low on fact, little more than noise.

Financial commentators and talking heads chase clicks by running outrageous headlines and trying to incite mania or panic amongst the unthinking herd. The greater the drama, the larger the audience.

Active investors live by the sword and die by the sword. Take a punt and double their money in a week. Embrace a HODL philosophy and see that same investment cut in half over a year.

Who is an investing genius?

Who is a greater fool?

Or is it mostly randomness and dumb luck? The older I get, the more I suspect this to be the case.

Another major influence is our perception of relative performance. Where do we anchor our valuation to? What do we measure our performance against? Both determine how we feel about the outcome.

Sold up 2% on yesterday’s close. A win.

Sold down 5% on the previous monthly portfolio update. A loss.

Sold down 15% on a year to date perspective. A big loss.

Sold at parity with where prices were six months ago. A draw.

Sold up 85% on the original purchase price. A big win, made smaller once the taxman takes his cut.

Each narrative accomplished by selling the same stock at same price. Yet each creates a vastly different perspective.

Sometimes, focussing on what we wish to do with the proceeds can dispel some of those conflicted emotions.

Was the sale part of a pre-existing plan? A periodic rebalancing? A scheduled drawdown?

Perhaps the sale was to finance the realisation of a life goal, our own or that of someone close to us. Our investments delivering warm fuzzy feelings or coping with those cold hard “life happens” realities.

Buying a house.

Making bail.

Paying for medical treatment.

Getting married. Getting divorced. Having children. Operating the bank of Mum and Dad.

For as long as I can remember I have been enthusiastic when it comes to investing new money. Yet hesitant to sell investments. I hadn’t made the schoolboy error of falling in love with a property, or becoming sentimental about a stock that had enjoyed strong past performance. My investing had always been based on the numbers.

No, what troubled me was the idea of killing off a goose that laid golden eggs. Sacrificing a long term income stream to service an immediate and typically short-lived want.

Younger me used to hide behind naïve concepts such as natural yield, convincing myself that living off the natural cash flows generated by investments was fine, but consuming capital was not.

Which, when you stop and think about it, is a logical fallacy. Facepalm worthy mental accounting.

The only real difference between dividend payments and share buybacks is the tax treatment each incurs. The only difference between a share buyback and a sale is which party decides the timing.

Each outcomes entails the investor having capital returned. Regardless of whether the company decided to offer a 2% dividend yield, or I manufactured one via selling off an equivalent number of shares, the gross purchasing power of my return is the same.

Over the years, I grudgingly learned to embrace total return as the metric that mattered.

Investment A may offer a total return of 5%, funded entirely through capital growth.

Meanwhile, investment B might generate a 5% total return from rental income or interest.

Neither is inherently better or worse than the other, though tax policy often influences our behaviours to favour some forms of investment income over others.

Yet despite intellectually recognising the logic of these arguments, hitting sell still leaves me with a hollow feeling.

Not so much when rebalancing or adjusting asset class allocations. Rather it is when I convert an investment, in the productive use of capital sense of the term, into that non-productive store of deferred spending that many folks call savings.

My inner saboteur will chimp away with helpful observations like the following. All of them true.

If not now, then when?

Live a little, you only live once”.

The winner is not the richest corpse in the graveyard”.

Annoyingly, he is right. I hate it when that happens!

And yet the hollow feeling remains. Another thing the Hollywood protagonist never experiences. Just shut up and sell!


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8 Comments

  1. weenie 25 April 2022

    I don’t think I will ever really be comfortable selling my investments – I think I will always be plagued with doubt as to whether I have sold at the right time etc. Hence the ‘need’ for me to have part of my portfolio paying dividend income to soften the psychological blow of killing off the golden goose. How often would I sell, monthly, quarterly, annually? Even just writing this down is making me stress a little, lol!

    I think had I gotten into investing much earlier in life, I would have just gone down the dividend growth route as it’s the strategy which provides me with the most comfort. Sadly it’s not completely viable for me as I don’t have the time to build a big enough pot to provide an income which covers all my expenses, hence the mixture of both strategies.

    • {in·deed·a·bly} 25 April 2022 — Post author

      Thanks weenie. I think like you, I will forever be a reluctant seller, a hardwired aspect of my investing psyche for good or ill.

      I’m glad I eventually saw through my faulty mental accounting of dividends over gains. It was a tough lesson that I fought hard against, before eventually conceding I had been wrong in my thinking. But had I not, I would have missed out on owning some of the best performing shares over the last few years, simply because they didn’t make the decision for me to liquidate some capital.

      Of course low cost index tracker funds helped to slay those mental monsters via a different route. They don’t care about our biases and blindspots, they simply buy all the companies and diversify us into the whole lot!

  2. David Andrews 28 April 2022

    Sell decisions can be tough. Committing to that decision when you start consuming your investments rather than adding to them is my current procrastination point.

    “If not now, then when?”

    “Live a little, you only live once”.

    “The winner is not the richest corpse in the graveyard”.

    The monkey on my back whispers in my ear about the the wisdom of walking away from secure well paid employment as a recession or extended period of stagflation rolls in.

    My 7 year old son tells me that I can’t retire because we’d lose access to the handily located office car park.

    The planner in me runs the numbers in my trusty spreadsheet and confirms that the numbers look good. My inner saboteur points out the significant opportunity cost of ceasing to trade time for money.

    “If not now, then when?”

    Maybe after I get paid for the upcoming Bank Holidays, get my sponsored SC clearance and my employer signs off the expenses for my required fast track passport renewal.

    • {in·deed·a·bly} 29 April 2022 — Post author

      Thanks David.

      I guess there are two parts to that question. First is whether you can afford to make the leap. Second is what you’d do to replace the workplace as the provider of routine, socialising, intellectual challenges, and … parking spaces.

      Sounds like you’ve got the first part covered. It is in the latter where the unknowns lurk. School age kids potentially limit your range a little bit in determining what you get up to during term time, though the same backup plans that may apply now (before/after school clubs, nannies, holiday camps, etc) could be applied then.

      The liberating thing is simply having the viable option of walking away, even if we choose not to exercise it. That defuses much of the workplace stress and uncertainty. Flips the lens, “have to do” becomes “choose to do“. That strips away the excuses, nobody to blame but ourselves if we’re unhappy or unfulfilled in a given job or at a given workplace.

  3. Dr FIRE 1 May 2022

    “Social media Chicken Littles” gave me a good laugh!

    I haven’t sold any investments yet, and hopefully won’t for a long time to come. But I am reminded of several other blog posts talking about how hard it is to start selling your investments down once you have to start living off of them, rather than adding to them, and reversing decades of saving. Not sure how I’ll navigate that, but presumably that’s a long way off for me yet!

    • {in·deed·a·bly} 2 May 2022 — Post author

      Thanks Dr FIRE. Enjoy the accumulation phase.

      Selling can have a multitude of triggers, some long planned, some unexpected, some simply rebalancing asset allocations. Whether it is a good or bad time to sell is only knowable with certainty in hindsight, and often times doesn’t really matter as it is the “right” time to sell from a lifestyle perspective for the person making the decision in the moment.

  4. freddy smidlap 2 May 2022

    we just started selling this past year when my wife retired from part time work. it’s a delicate balancing act for sure, especially in the death spiral growth stocks have seen this year. for my money, the part that people (especially retail investors like me) struggle to learn is you don’t have to sell 100% of a position you continue to believe in. anyhow, with my full income for another few years, only selling to build a cash position and fund some extras in life has been good practice for when we have to live 100% off of investments.

    • {in·deed·a·bly} 2 May 2022 — Post author

      Thanks freddy. Having an extended trial run sounds like a great idea, conditioning you both to what will become the new normal. Busting myths and dispelling fears.

What say you?

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