In November I took my five-year-old’s life savings (mostly tooth-fairy money and birthday gifts) and bought her 4 shares in Disney stock via a custodial (UTMA) account.
Fellow readers of If You Give a Pig a Pancake will already be familiar with the idea that certain actions lead inevitably to reactions. You see, if you give a pig a pancake, next thing you know she’s going to want syrup. And if you give her syrup, she’s going to get all sticky and ask for a bath.
And if you buy Disney shares with your five year-old’s tooth-fairy money, next thing you know you’re going to walk into her room to say good night, and…
“I want to sell my Disney shares.”
“Um, what? No. No! NO! Stop!”
“But I don’t like that all my money is gone from my bank.”
You see, right there, that’s the problem with five-year-olds and their stock portfolios. They buy the thing and then they want to sell it.
Actually, no, that’s not the problem of five year-olds.
That, right there, is the problem with all people and their stock investments. They want to sell them. They don’t like that the money leaves their bank account. And the value can go down. I’m here to say: Don’t sell. No matter what.
The whole darn thing won’t work if you sell.
Magical Fairy Dust
You see, stocks produce magical pixie dust if you treat them right. Buy them in diversified bundles (like a mutual fund!) Then treat them with benign neglect over the next, say, thirty years, and you will be rewarded with a pot of gold at the end of the thirty-year rainbow. Tinkerbell herself couldn’t produce anything more magical than your diversified – hopefully low cost! – mutual fund.
Ok, let me stop here for moment. Maybe pigs, pancakes, pixies and pink castles are not getting the message of NEVER SELLING across strongly enough.
Let me change the channel so abruptly you will be left breathless. For our next analogy, let’s go to the darkest moment in Western Civilization over the past century.
Never Give In
I’ve been reading a lot about Winston Churchill’s life lately. I can’t recommend William Manchester’s three-part biography series The Last Lion highly enough. Summarizing 3,000 pages of Manchester’s biography into a three-word motto for Churchill’s life would go like this: “Never Give In.”
In 1940, when the Nazis controlled all of Europe between Norway and Greece, with America isolationist and Russia in a cynical alliance with the Nazis, and only the British, alone, standing against Hitler, Churchill never gave in. As he said in 1941, before the US entered the war:
“Never give in, never give in, never never never – in nothing, great or small, large or petty – never give in except to convictions of honour and good sense.”
The Nazis embodied the darkest, mostly beastly version of humanity. They built the greatest military force Europe had ever seen, fueled by sadism, racist ideology, and terror. First Czechoslovakia, then Poland, then Norway, Holland, Belgium and finally France succumbed in mere weeks to brutal blitzkrieg invasions. Imagine today’s ISIS, only they had already conquered all of Europe, with the largest and best-trained army in the world, led by a charismatic psychopath fulfilling his long-promised destiny of racial genocide.
England, with Churchill at the head, stood alone. Prominent members of the British government in 1940 called for making the best peace compromise possible with Hitler. Hitler himself assumed Britain would ask for a peace settlement, so he could focus on conquering his next goal, Russia.
Churchill never wavered.
On June 4th, 1940, having lost ally France in a matter of weeks, and having barely escaped with the tattered remains of the British Expeditionary Force from Dunkirk, Churchill never considered capitulation to the Nazis. He relayed the defeat to the House of Commons, but said:
“We shall go on to the end, we shall fight in France, we shall fight on the seas and oceans, we shall fight with growing confidence and growing strength in the air, we shall defend our island, whatever the cost may be, we shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets, we shall never surrender.”
Bucked up by that example of Churchill’s spirit, let me re-summarize my approach to stocks: “Never Sell.”
“Never, never, never, sell.”
Can I be any clearer?
But, but, but
But interest rates are going up!
But the Democrats (or Republicans, or Trumpians or whomever) might win and everything’s going to collapse!
But oil prices!
Stop being a five-year-old. Be Churchill.
Incidentally, at times, she unveils her stubborn Churchillian resolve to never give in, like when I ask her to put on her shoes when we’re already late to get somewhere.
Can you picture me, scaring the living daylights out of my five year-old with this Churchillian bedtime story about never never never never selling? Don’t worry, I didn’t do that. (As far as you know.)
I can assure you of this: She will not be selling her Disney stock.
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