When a Man Loves a Stock

Credit: atibodyphoto at FreeDigitalPhotos.net

I was waiting to pick up a to-go order one night after work last week and I was still deep in thought about a recent client meeting. The tax planning and risk management portions of the meeting had gone very well, but I once again could not break through on the investment strategy piece. Despite repeated recommendations over numerous years to try and get this husband and wife to further diversify their portfolio, a vast majority of their net worth is still tied up in one particular stock. It was at that moment that an old song I happen to like came over the speakers: Percy Sledge’s “When a Man Loves a Woman.” Here is what I heard:

When a man loves a stock
Can't keep his mind on nothing else
He'll trade the world
For the good thing he's found

If holding the stock is bad he can't see it
The stock can do no wrong
Turn his back on his best friend
If he put the stock down

 

When a man loves a stock
Spend his very last dime
Trying to hold on to what he thinks he needs
He'd give up all his comforts
Sleep out in the rain
If things don’t turn out the way he thought it’d be

 

Well, this man loves a stock
He gave it almost everything he had
Trying to hold on to its precious dividend
I hope it don’t treat him bad!!!

 

When a man loves a stock
Down deep in his soul
The stock can bring him such misery
If the stock plays him for a fool
He's the last one to know
Loving eyes can't ever see…

 

Now with apologies to Percy, my thoughts and his lyrics got a little mixed up. Still, it is kind of uncanny how interchangeable “woman” and “stock” is, isn’t it?

Based on my experience I think it probably is safe to say that the degree of emotional attachment employees sometimes develop with their company’s stock, investors sometimes develop with the stock of companies headquartered in their state or region, and heirs sometimes develop with stocks they have inherited can only be rivaled by romantic crushes. No matter the stock, and no matter the consensus outlook on that particular stock, I always remind people with significant holdings in one or a couple of securities of companies like Enron, Wachovia, and General Motors. Anything can happen to the stock they love, and although concentration can sometimes lead to wealth accumulation, diversification certainly helps with wealth preservation.

Next time I will once again attempt to articulate the risk-adjusted advantages of a prudently diversified portfolio, but I may just have to make the next meeting a dinner meeting. Perhaps old Percy Sledge’s tune will come on again and resonate with my clients like it did for me. Here’s hoping, because loving eyes sometimes can’t see.

-Tom