Youth has never been my cup of tea. During my years as a magazine editor whenever I had the opportunity to interview a “hot young thing” or an icon, no contest. Thus, one balmy afternoon in September I was in a midtown hotel room sitting across from Miss Betty Bacall who was in town promoting a film. Well into her 80s she was more than a little hard of hearing but was remarkably well-behaved and game to answer questions. Her beloved Papillon, who she swore had psychic powers, was nestled in her lap.
Never one for mincing words, Miss Bacall had a few choice ones for the late Frank Sinatra, (a former lover), as well as limo drivers in general, (her backseat manners led both her and her luggage to be left on the sidewalk on more than one occasion by irate chauffeurs.)
Miss Bacall passed away last year and a few weeks ago Bonham’s auctioned her estate. Like that of the late Jacqueline Kennedy Onassis, the Bacall sale reflected variegated tastes and a lifetime of accumulation. (The Yves Saint Laurent/Pierre Bergé sale they were not.) The lots included sculptures by Robert Graham, (Angelica Huston’s late husband), and Henry Moore, as well as a pair of nut dishes decorated with nibbling squirrels, a brown toga dress from Yves Saint Laurent, and an army of comfy pantsuits.
Judging by the state of Miss Bacall’s apartment in Manhattan’s Dakota building, the lady was less a curator than a pack-rat. And, why not? In most cases she bought things from people she had a personal relationship with and was, no doubt, deeply attached to the pieces.
It’s a little different for investors though. Few of us have “personal relationships” with National Oil Varco or Baker Hughes or any of the other companies in which we may invest. Still, we get attached. These leads us to hang on to our “favorites” long after we should have pressed the ejection button.
When I started investing there were no ETFs and mutual funds came with exorbitant fees. Instead, over the years, I built up a portfolio of individual securities. Each year I find that as the number of securities grows, I wonder if, instead of diversifying, I’m “diworsifying”.
Diversification is an effective way to reduce portfolio risk. By holding securities and asset classes that are negatively correlated with each other, in theory, when one class goes up, the other should do the opposite, thus reducing some of the volatility of returns.
Trouble is we tend to get emotionally attached to our holdings and are reluctant to part with them even when it would be prudent to do so. “Buy-and-Hold” is only one investment strategy and it is by no means a one-size-fits-all. Sometimes it works, other times it don’t.
For me, one advantage of online trading is the relatively low-cost way I can observe my patterns of behavior and attempt to change the unproductive ones. For example, at only a few dollars a trade, I take small positions in promising companies, make small profits (hopefully), and then move on. This type of dalliance would be much more costly at my full-service brokerage, which is why there, I hew to the “buy-and-hold” philosophy and risk “securities sprawl”.
A bonus of my online trading is it’s making me more disciplined and less emotional when it comes to general portfolio management. I still have my favorites but I’m more inclined to part with them sooner when a better opportunity beckons. As a concession, I keep a watch list with my past holdings, the way someone might keep tabs on a former lover on Facebook. (I wish them well, but not too well!)
In How to Marry a Millionaire, Bacall, Betty Grable and Marilyn Monroe played women who wanted to snag rich husbands. In the end, they married for love. Except that Bacall’s beau was secretly a scion—love & money, honey.
R.I.P. Miss Betty Bacall
Luck & Gravity 