Beware of Personal Bias

My 6-year-old is AWESOME at soccer. I’m not kidding. This child started kicking a soccer ball at the age of 2 when she was dragged along to her older sister’s soccer games. I have the cutest video of her dribbling the ball around the field, even though the ball was taller than her kneecaps.

Fast forward to this past spring, where I coached her and nine other 6/7-year-old girls, she’s in her fourth season of playing, and her experience and natural talents show. She’s fast, sees the angles, and has skills. She also has a mother willing to admit to at least a small dose of personal bias.

She wanted to play just about every minute she could every game. As the coach’s daughter, she thought she’d get special treatment to play whenever she wanted. However, we play soccer in the local Parks & Rec league, and league rules indicate that all girls must play at least one full quarter.

“Everyone gets to play” is a great rule. At this age, the girls are still learning how to play, and coaches are still learning the strengths and weaknesses of each kid. If I didn’t play all the girls, I might not have seen some of them score their first goal OR go from never kicking a ball to being a standout defender keeping the opponents’ kicks out of the net. Not all girls had great talent, but with time to play and teamwork, we saw the unique skills they each brought to the game. And, not that anyone was keeping track, but we ended the season undefeated!!!

Unlike the motto of “everyone gets to play,” it is easy to fall into a personal bias regarding individual stocks. It could be the company you work for, a stock you’ve followed for a long time, or inherited from a family member. For employer stock, there may be additional confidence or knowledge on how well the company is doing. For other stocks, there may be sentimental reasons.

It is not necessarily bad to own individual stocks; we need to know how these stocks fit into a plan.

When discussing individual stocks, we must listen to the “why” behind the ownership and what percent of the portfolio it represents. We also want to discuss the potential added risk of an individual stock. We want to acknowledge where we have personal biases.

While not opposed to individual stock ownership, we like to discuss the other 13,000 company stocks we can invest in globally. When we own them all (through low-cost funds), we let “everyone play. ” Some companies/ segments of the market will have a performance year in which performance is like that of a stud forward player. Some years, some companies/segments will prove that defenders can win games.

If we own it all, we allow the companies to work collectively as a team to provide the best long-term outcome. We no longer rely on a handful of companies to carry the portfolio year in and year out, and we don’t have to worry about whether or not we have the right defensive team in place for years that prove more challenging.

If you’re worried about whether or not your biases have impacted your portfolio, give us a call. We will listen first and foremost, and then we will help you take an unbiased, disciplined review of your plan.