Bill was one of the most hardworking men I’d known.  He spent most of his life building up his company, in hopes that one day when he sold it, the sale would give he and his wife enough money to retire comfortably.  In 2004 he did just what he had hoped, and was able to sell his company for just over 2 million dollars.  All that hard work finally paid off, he thought to himself.
 
Bill’s first order of business was to sell his home in Ohio, and move down to Florida where he and his wife could spend their time walking the beaches and tasting the wines.  He had planned to pass the time by dabbling in the market and doing his best to add to their already comfortable savings.  So, Bill found a good broker and worked through him to learn the art of stock trading.
 
Bill’s broker, Larry, had been in the financial industry for years.  He had met and worked with all different types of personalities and had been very successful in coaching his clients towards substantial GAINS.  “The secret is to have a plan, and follow it.  The market can be an emotional game if you let it get to you.  Stick to your plan, and it’s much easier to come out a winner,” was what Larry always told his clients.
 
For the most part, Bill was good about sticking to Larry’s advice.  He mostly invested for the long term, but he still would occasionally get a little too risky for Larry’s liking and put most of his money on one stock for a quick GAIN.  It was during these times that you might have heard Bill telling Larry, “I didn’t make this money by not taking some risks along the way, so if you can’t take the heat, then get out of the kitchen!”
 
It was during one of these more risky investments that Bill found out what it meant to chase a LOSS.  He had bought the stock known as APX, after a buddy of his had given him some so-called, ‘inside advice.’  Bill had bought the stock at $45 and enjoyed watching it climb to an all-time high of $65.  It was at this time that his broker, Larry told Bill he should sell his position in the stock and move back to a safer approach.  “My buddy told me that this stock is going to split soon, so I’m sticking with it,” was Bill’s rebuttal.  And stick with it he did.
 
Larry and Bill watched the drop back down to $55, then $45, then $30.  At each juncture, Larry tried to persuade that he needed to sell off the stock and keep what he still had.  At $55, Bill said he would sell the stock known as APX when it got back to $60.  When it got down to $45, Bill decided once it got back to $50 he would feel OK about selling it.  Same story when the stock reached $35, but as was the case each time, it never went up.
 
The stock went all the way down to $5 and every step of the way, Bill was convinced that it would bounce back and get to its glory days and provide him the earnings he had hoped.  Rather, Bill traded what he wanted most, for what he wanted in the moment and now works at the local Starbucks serving lattes to strangers.
 
Brokers such as Larry call this behavior, “chasing a LOSS.”  Chasing a LOSS occurs when an investor fails to step back from a position even in the face of great LOSSes in hopes of getting some of their money back.  Larry will tell you, “Watching a client chase a LOSS might be one of the saddest experiences I’ve watched another go through.  During the entire process, I tell them what is going on and why they are experiencing the emotions that cause them to continue in with their downward spiral.  Rarely do they ever listen.  Instead, they end up squandering away a lifetime of earnings.”
 
It’s been said that the emotion a human being feels in the face of a LOSS is 2.5 times stronger than had that same person had a GAIN.  In other words, a LOSS has a bigger impact on our emotions and can cause us to do some squirrelly things.  In the case of Bill, he threw away over $2 million dollars because of the emotion from having a LOSS.  The irony is that Bill had the emotion of a LOSS, when his stock position was at $55 even though he was still up $10 overall.  He just wasn’t at the peak anymore and therefore perceived as a LOSS.
 
Now, it’s this kind of stuff that really intrigues me.  Not because I like to invest money.  In fact, just the opposite is true; I HATE it for the very same reason that we are discussing...the powerful emotion felt by a LOSS.  Like a sweet white wine, I do not have a taste for it.  So why do I bring this up then?  Great question.
 
The reason we are discussing this is to compare it to so many scenarios in our lives.  Scenarios in which we can’t, and won’t walk away, as it might seem like a LOSS.  Some of these scenarios might include your career, your family, a home, or infinite other possibilities.  One scenario in which we all have trouble walking away from comes in the form of our experience.  I see this all the time with new ideas or new processes that aren’t accepted in the professional world.  Sure, many times these ideas are kept at bay based off of habits that keep the new idea from being used, however if you think about it and the person knows it’s the habit, then it isn’t far from the scenario mentioned above.
 
Take for example a professional that is presented with a new way to communicate with customers and co-workers.  More often than not, if that professional was completely honest with themselves, they could admit that the new idea would benefit them.  However, a use of the new idea also comes with a subtle suggestion of ‘their way’ as being ‘wrong,’ and therefore hard to accept.  The emotion of change is hard to deal with and therefore the old way is hard to let go of.  Does this sound anything like “chasing a LOSS?”
 
I’ve seen this come into play when older generations move from the homes they grew up in.  They know they can’t take care of it, they know the home is no longer needed, yet they view it as a LOSS.  A LOSS of memories, a LOSS of great times, a LOSS of what used to be.  In that situation, you don’t hear much about what they GAIN.  You don’t hear about things like, more freedom, more money, less stress.  Again, this is because of the emotion and emphasis we place on LOSS.
 
Now, I know that it may take some thought to make the connection between our original story and change.  However, they both involve strong emotion as it relates to LOSS.  What you need to do is remember that a LOSS is simply an attitude towards an event.  Bill could easily have sold the stock and had a profit.  That professional could easily accept the new ideas and call it growth.  The person selling their home can call it opportunity.  However, we don’t want to do that.  We want to rid ourselves of the emotion caused by the LOSS, and the only way to do that is to try hard to hold on to it, or chase it.
 
Here’s my advice, stop chasing your LOSSES.  I’ll go back to the idea of being tied to a pier.  The tighter you have your boat tied up to something, the harder it is to move with the water.  When change comes about, the waves will smash you on the shore, they will pound you into the pier.  Let go.  You’ll have much more freedom, and you’ll be able to float in whatever direction you choose.  Life, both personally and professionally, is so much easier when your mind is open and free to new ideas.  Have a great week everyone!