One of the crazy things about stock market investing is that we can unload a stock on a whim. We could spend three decades owning some Exxon stock passed down to us from our great-grandparents, collecting the dividends and adopting the perspective of a long-term business owner, and all of a sudden, we could sell it all after waking up in a cranky mood one day, logging into our brokerage account on our computer, typing in the three letters “XOM”, and then clicking “sell.” In the wink of an eye, you can undo decades of sedulous business accumulation. I find it scary how easy it is to undo a good thing.
Go old school and get a stock certificate so that you can have a physical representation of your stock holdings. Ever wondered why people are much less likely to panic sell real estate than their common stocks? Real estate is tangible and take a while to sell (as they say in the industry, it is a highly illiquid asset). Also, there is a physical representation. You can see the mailbox on the property you own, touch the brick, walk through the house, and so on. This “realness” allows you to keep in mind that you are the actual owner of something that has the capacity to be a cash generator, and it should make you much less likely to panic sell your real estate holdings.
When we are dealing with common stocks, we are on a much more abstract level. A company like “KO” is symbolized by two letters, and your personal ownership is typically on a computer screen. For some of us, that makes it difficult to remember that we are the part-owners of one of the ten most powerful businesses in the entire world. If you transfer your Coca-Cola holdings to a transfer agent like www.computershare.com, then you can receive a stock certificate for free.
This increases the chances that you will actually think like a part-owner of the business, and it also has the benefit of making your ownership stake less liquid, because you would have to physically mail in the stock certificates to your transfer agent, and from there, elect to sell your stock. That level of resistance can make it more difficult for you to sell.
Additionally, keep a physical dividend check from the company around somewhere in your house. If you have 300 shares of Coca-Cola and you have an $84 dividend check sitting around your house, you can remember that you own an actual dividend machine that sends you “free” money every ninety days. Most companies give you a year to cash your check, and from there, it is standard policy that companies will replace any misplaced dividend checks up to seven years after the payment date. If you get in the habit of keeping a ninety day lag on your deposits, you will always have a physical representation on hand that you are dealing with a very real business that generates profits despite the current stock market quotation at the time.
All else equal, it is a lot easier to get on a computer, type in “KO” and then click “sell” than it is to mail in a Coca-Cola stock certificate with fine calligraphy on it, discard the importance of the physical dividend check sitting in your possession, instruct the transfer agent to sell it, and end your ownership that way. The second you get physical representations involved, it is a lot harder to panic sell and do something stupid. Charlie Munger once said that living a successful life is a lot easier than most people think simply because it involves avoiding bad things a lot more than it involves actively doing good things. If you introduce some physical representations of your ownership stakes into your life, you will have created a nice little defense mechanism against panic selling in a moment of weakness. Cash machines are fun to own. Life is a lot better when you get assets on your balance sheet that pay cold hard cash every ninety days. Do what you gotta do to make sure those assets stay on your personal balance sheet for the rest of your life.
Originally posted 2013-06-25 17:37:50.