My Dad just recently retired and, with that, he’s educating himself on personal finance as his new hobby. My Dad has been very good on reading up on things, asking me for back-issues of Moneysense magazine, picking people’s brains etc.

I most likely got my love of bank stocks from my Dad; his advice to me as a teenager was that governments do not let big banks fail no matter how badly they have been run so invest in a bank and hold on to them. Oh how true he was on the bailout account! You can well imagine then how torn we are between buying banks on sale or staying away from them altogether.

One thing to know about my Dad though is that he is a doer. He can’t sit still. He always has to be doing something. The worse thing you can tell my Dad is that a Saturday afternoon should be spent lounging lazily at home. He’ll find something to do.This same sense of being a doer translates to his personal finances.

So we have the exact same conversation every week for 6 months now:

Dad: “What do you think I should invest in?”

Son: “Nothing. Just wait.”

Dad: “Really?”

Son: “Yes, no one has a clue on what’s going on. Just wait.”

My Dad thinks I am being too patient (I am over 20% in cash right now) and that I am going to wait too long and miss a good opportunity. Me? I honestly have no clue what is happening (does anyone?) so I just sit and wait until there is some consistent pattern to the market. It is easy to say the market is going down but when will we reach the bottom? You have to remember that the unemployment rate in 1991 hit 11% in parts of the country; it sits at 6.3% right now so is this 1991 or 2001 or the 1970’s?

In the past, I would also have cash sitting in my account for “too long” and I would just buy something because I was scratching an investment itch. I don’t think I have ever made money scratching the itch so I am also stun by past experiences. I would rather win the race to 2nd.

The morale of the story is that sometimes action for action’s sake may do more harm than good and sometimes you just to have wait it out.

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The flip side of this story is people putting their heads in the sand. The economy inevitably comes up at holiday events (which is why none of them I have attend have been dry events….) and I have heard a lot of “I don’t open my portfolio statement anymore. Its too depressing…” I find this behavior negligent and may explain why we make such easy marks for the investment industry.

My portfolio is taking the usual 20% plus beating that everyone else’s is but how do you know where you are going if you don’t know where you are? I dislike opening my statements as much as the next person: my typical routine is to open them, assume the fetal position for 5 minutes and then figure out what happened and to reaffirm to myself that the plan is good even if the short-term timing is not.

I equate personal finance to parenting. Your portfolio is your child (in many respects true because your children will be inherenting it from you). You just don’t throw money at every problem your child has and think that’s all that is required. You have to spend time and attention to it- whether your child is good or bad. You also don’t blame the teachers if Johnny is misbehaving or not learning properly. At the end of the day, Johnny is your kid. You have a responsibility to spend the time to figure out the issues and fix them (which sometimes means replacing the teacher too).

Not opening your statements is equivalent of a parent sending their kids to school, completely abdicating their parenting to the teachers, not looking at your kid’s report cards for years on end and then wondering why your kid is 18 in jail and a drug addict and having the gall to blame the educational system and society. If everytime a parent walked away if their child misbehaved, we would all be orphans wouldn’t we?

Yes, these are very difficult times but the ones who will get through it ok are the ones who take responsibility for their lives and work through the issues. The ones who sit by passively, hoping the world will spoil and pamper them via some mythical magical bullet bailout, will end up on short-end because they are allowing others to dictate their lives for them.

In many ways, this is the best time to learn about pesonal finance since failure is the mother of all teachers.