Common Newbie Investor Mistake

Yesterday hubby’s TSP (military Thrift Savings Plan) annual participant statement arrived in the mail, and I opened it up last night after work since hubby decreed I shall handle the investing things in our house.  I carried the paper to him to look at, hoping to pique his interest in investing further than last week’s appointment with my Edward Jones guy.

After looking at the totals, hubby focused on the line that said, “Investment Loss  -$17.64” and immediately got upset.  How am I losing money? he asked.  If I’m losing money, wouldn’t it be better for me to pull out all the money and put it in a shoebox?  His rationale is that if it’s in a shoebox, at least he won’t be losing any.  He also mentioned pulling it out of the funds and putting it into a money market account like we set up last week.  I don’t think he read last week’s post about there being TWO forms of risk in investing.

I got upset when he said this.  I tried to explain that the “loss” wasn’t really lost, the idea of shares and price of shares fluctuating, and how we were able to buy more shares when the price is down.  Neither hubby nor I are very much educated about investing, although I am trying to change that (for both of us).  So my explanation ended up including boxes of cereal and sale prices type of thing.  It placated hubby, but I really am not sure it would be a “technically correct” explanation.

Hubby had also expressed his concern that he could “lose all of it.”  I tried to explain that if his investment went down to zero, we have much bigger problems than money since it would mean the entire stock market was worth zero and we should get guns and bullets and food and water instead of money.  If the stock market is going to collapse (hypothetically) I would much rather bury ammo and weapons than gold.

I shouldn’t really have been so hard on hubby.  In fact, just last week my Edward Jones guy had about the same conversation with me when I went in to his office with the idea I should switch my Roth IRA to a different fund.  My Ed Jones guy didn’t get nearly as upset as I did last night, but calmly printed out about sixteen pages of data (from a really cool program) that showed me the fund I have and the fund I was looking at are virtually identical with virtually identical rates of return.  He then explained he would make more commission by switching the fund for me, but he didn’t think it was necessary or even a good thing for me to do.  Hubby was sitting in the office with us, and heard the Ed Jones’ guy’s calming explanation.  I guess he just didn’t understand it.  Hubby says he never really liked math in school.

So basically hubby and I both committed a common newbie investor mistake: panicking or second-guessing our investing plan when the market went down.  I simply wanted to use my tiny amount of new knowledge to find “something better.”  Hubby wanted a shoebox, either the literal kind or the financial equivalent to it.

Now, I feel an irrational urge to watch hubby … to see if he is burying anything out in the yard.  LOL  Gotta make sure he buries useful things, ya know…