Marty Bannon's Investment Mistakes

A recent Wall Street Journal article highlighted the unfortunate series of investment decisions made by Marty Bannon -- father of current White House counselor and chief strategist Steve Bannon -- during the 2008 stock market collapse.  We can all learn from Marty Bannon's investment mistakes.

Marty Bannon, now 95, spent his entire working life with AT&T.  Like many people, his savings and investment plan was closely linked to his career -- he directed all excess family savings into AT&T stock.  When the stock market started to sell off in 2008, Marty looked to the financial media and market pundits for advice.  CNBC's Jim Cramer, who on October 6th of 2008 told viewers to sell any money from stocks they would need in the next five years, was a strong influence.  Marty pulled the plug on AT&T stock the following day.  Not after a careful assessment of the risks and his overall financial situation; but in a panic.  He recalled thinking "this is going so fast, I'm going to be totally wiped out."

Can you count the mistakes?  First, putting all of your investments in one basket isn't safe, no matter the company.  Concentrating your assets is the investment equivalent of Russian Roulette, regardless of your confidence or relationship with the company.  Second, when things don't appear to be going well with your investments, the absolute worst thing you can do is to expose yourself to the financial media.  Their sensational claims are very difficult to ignore during periods of heightened personal and financial anxiety and put you at serious risk of a regrettable decision.  Third, making financial decisions without the input and help of an honest, trusted financial advisor is ill-advised for most people.  Having a rational voice to provide you with an alternative perspective during difficult times can be the difference between acting irrationally and avoiding a serious mistake.

None of this is to imply that investors could have avoided losing money in 2008 had they invested differently or diversified more broadly.  The chart above shows otherwise.  All major stock asset classes lost value before eventually recovering in 2009.  But I do believe most investors, in possession of a 12,000+ stock portfolio, spread across over 40 different countries ("Dimensional Equity Balanced Strategy Index"), would have felt more confident that global capitalism would eventually survive and recover as opposed to the prospects of any particular company.  Holding some of your portfolio in low-risk bonds ("Dimensional 60/40 Balanced Strategy Index") would have helped lessen the temporary decline and offered you an alternative asset to sell if near-term withdrawals were needed.  And working with a trusted financial advisor who could help you to refocus on your long-term financial plan and look past the widespread short-term hysteria could have been invaluable in preventing you from making the wrong decision at the wrong time.

If you would like a second opinion about whether your current investment plan is excessively concentrated, or if you're worried that you may not make the best decisions during the next bear market or financial panic, don't hesitate to reach out to us.  We would be happy to discuss your financial situation with you further.

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_{Past performance isn't a guarantee of future results.  Indexes are not available for direct investment.  Index returns include the reinvestment of dividends but not the expenses associated with a real-world investment portfolio, including potential advisory fees.  This content is provided for information purposes only and should not be considered a recommendation or endorsement of any particular security, strategy, or service.}