The answer is quite simple, really, but I’ll get to that in a moment.

First, a client story . . .

I received a voice mail from a client earlier this week that went something like this:

“Hey Russ, I was talking to a couple of buddies and their advisors are telling them that they really think this market could crash big time so they’re taking some money off the table. Do you think we should park some money in cash for a while?”

This client is a smart guy. He has a graduate degree. He’s an executive at a Fortune 500 company that you’re familiar with. But, this isn’t an issue of intelligence.

This is an emotional issue, and one that I deal with regularly in my work with clients and their families.

I’m guessing this client is thinking a couple of things as he’s dialing my phone to leave me this message.

1. What if the market “crashes”? I mean it went down something like 1,000 points in an afternoon a couple of weeks ago.
2. What if my buddies (or their advisors) know something I (or my advisor) don’t?
3. I’m a little concerned about [interest rates, oil spills, politics, etc.] right now. Maybe I should just call a “time out” and watch from the sidelines for a while.

These are just a few of the dozens of things that were likely going through this client’s mind that prompted him to call me. And I’m not criticizing him or anyone for thinking these things. I sometimes wonder the same things myself.

However, I believe the biggest value I deliver to my clients is helping them create a strategy that is based on helping them make the most of their one shot at life AS WELL AS being a constant voice of reason and objectivity to keep them from making an expensive mistake.

My response to this client’s voicemail?

A firm “No”

We will not be taking any money and parking it anywhere, and here is why:

• Does the client need this money right now?  -No-
• If we sell, are his buddies’ advisors going to let us know when to get back in the market?  -No-
• Are these other advisors intimately familiar with my client’s life, goals, objectives and strategy that we’re currently using?  -No-
• Are my client’s buddies or their advisors aware that my client only has approximately 80% of his investments in the stock market?  -No-  (the rest are in high quality bonds and money market funds which is what this client’s personalized plan calls for at this time)
• Can these other advisors provide any evidence of why they believe the market is headed for a nosedive?  -No-

I could go on, but I’ll spare you. Does this mean I think the market isn’t going to crash or that I know something these other advisors don’t?  Absolutely not. I don’t know and neither does anyone else.

My point is that often we’re looking for reasons or excuses or rationalizations to pacify our emotions. But if you or a Trusted Advisor can examine these emotions with an objective lens, you’ll often find them lacking in substance.

Oh, and regarding when to buy & when to sell?

Buy when you have money to invest, and sell when you need the money. (told you it was simple, but that doesn’t mean it’s easy)

What do you think? Please leave a comment below.

Photo credit: volpelino