My Embarassing Confession

April 04, 2014

Yes, I’ll admit it. It’s embarrassing and I’m not proud of it but I will confess that I have spent hours playing Candy Crush Saga on my phone. Mostly at airports or on rental car shuttle busses, but I have played the game for more hours than I am proud to admit.

There’s a logical explanation, at least. My daughter downloaded it on my phone before a flight so that when her phone lost its charge, she could use mine. She asked me to play a few levels to advance the game to a point where she wouldn’t be starting from scratch. By the end of that flight…I was hooked. I blame you, Jordan!!!

The good news for me is that I was only hooked for a brief period of time and have since stopped playing the game and have deleted the app from my phone. So, maybe there is some solace to be taken from that. Why do I make such an admission? The makers of Candy Crush Saga (king.com) recently had an IPO (Initial Public Offering) of their stock on the New York Stock Exchange. It didn’t go well. Kind of like me playing their game…

One inevitable part of my life as a financial planner/financial educator is that every time a new IPO hits the market, I get calls or texts or emails from friends and acquaintances asking me if it’s a good idea to buy into the IPO. Honestly, I don’t have the foggiest idea if any particular IPO is going to be a good investment or a lousy one or any long-traded stock for that matter, either. Everyone is surprised when I say that I have no idea if the stock they ask about will be a good or bad investment. I truly wish I knew!!! I’d sit back and trade stocks all day from my yacht. Given that I don’t know if king.com or Facebook or any other stock is going to be a way to make a yacht-load of money, what do I tell people who ask me about stocks?

Do your homework! Learn everything you can about the company. How much money do they make? How much do they spend? Are they profitable? Is it sustainable? Are they a one trick pony? Who are their competitors? Is their business growing? I’m sure at one point, a typewriter manufacturing company was the hottest stock on the planet.
Even if you think that it’s a “can’t miss” opportunity, be careful about how much of your overall wealth is tied up in one company’s stock. I have seen tragic stories of people who, on paper, had a significant net worth but failed to diversify out of one company’s stock only to see that company fall on hard times eroding or eliminating their wealth.
Have an exit strategy in place before you enter. Most people who buy stocks don’t have a clear “sell strategy” when they buy or even at any point in their ownership of that stock. Are you happy with a 10% increase? 25%? Are you hoping for 200%? What about the downside? Will you sell if you lose 10%? 50%? All of your money invested? Everyone needs to develop their own investment philosophy, and knowing your exit points both on the upside and the downside should be a part of that. The most successful investors have “rules” that they follow when investing.
Having “rules” or a “system” in place helps with one huge thing. It helps to remove emotions from investing. Most of the big mistakes people make in their investment lives are allowing emotions to become more important than logic and reason. Emotional investing usually equates to poor investing. Eventually!

So, now that my dirty little secret is out there…please don’t judge me! But do judge your investments. Just use your head, not your heart, and you can figure out if you want to make Candy Crush Saga a part of your portfolio.