Hindsight can prompt people to doubt choices

Question: At the urging of my financial advisor, I sold the majority of stock that I held in the company where I worked for over 20 years. Now the stock has doubled in value. I feel foolish for having sold the stock and I am rather upset at my advisor for getting me to do this. Looking back, wasn't this a mistake?

Answer: Of course it was a mistake…looking back.

It will also be a mistake for every person who dies in an automobile accident today to have gotten out of bed…looking back. Should no one drive?

This upcoming year, a number of businesses will go bankrupt. Looking back, was it a mistake to start any of them?

I recall a conversation with a successful businessman about the cost of his business location.

"This place cost me $10,000,000," he said nonchalantly.

He could see the perplexed look on my face. He had a nice business, but I could have built it for much less than $10,000,000.

"When the land for this place became available in the early 1970s, the only money I could scrape together was by selling $10,000 worth of stock I had in this little redneck company called Wal-Mart," he explained.

$10,000 worth of Wal-Mart in the early 1970s is worth well over $10,000,000 today. Ouch!

But my businessman friend is philosophical about it and enjoys telling the story. He is wise enough to know the folly of evaluating choices you've made based purely on 20/20 hindsight.

In fact, he'll tell you that if he were faced with a similar situation today, he would make the same choice - because he wouldn't know the future value of the stock he would sell today any more than he did 30 years ago.

It is definitely possible to become rich by holding on to a single stock position and riding it to the stratosphere. Possible, yes. Likely, no.

But if it is possible to ride it to the top, is it not also possible to lose your shirt using the same strategy?

Do the names WorldCom, Enron or Lucent mean anything to you? In their day, these were names that were synonymous with leadership in their industry, success and solidity. Enron and WorldCom as publicly traded companies are gone, while Lucent is a shadow of what it once was.

Do you know Andrew? How about Gilbert, Elena, Alicia or Allen? No? Frederic, Eloise or Celia?

If these names don't ring a bell, let me help you out - Katrina.

That's right. These are all names of hurricanes that have hit the Gulf Coast in the last 30 years.

Over the years, some folks got tired of evacuating every time a big storm started brewing. We got used to seeing TV reporters live from the storm area, getting rained on but otherwise unhurt. Some grew to believe in their invincibility to such storms.

Then Katrina came.

Sometimes evacuating a storm threatened area turns out to be much ado about nothing. But guess what - we all just learned that you evacuate anyway. Because you never know when the "once-in-a-lifetime" perfect is going to hit.

When it comes to surviving storms or preserving wealth, it only takes one big mistake to erase a lifetime of hard work and good luck.

Looking back, you were right to diversify your portfolio. So was your advisor. Thank her for me, will you?