I’m hoping some of you will respond in the comments below.
I started thinking about this today. As I look at some recent investments. I started to realize that context plays a big role in this.
Investing
I bought 10 shares of a company called Axon Enterprises for $586.61 per share back in February. It’s been up and down over the last few months, but overall, I’m up. I’m currently up 28%.
It cost me $7,039 and I’m up $2,024.54 today.
Is that a Lot?
As I look through my spreadsheet, I think “that’s cool.” A nice little bump in a short time. Right On.
But let’s say I’m walking down the street and I see a $20 blowing past. Yes, I’d pick it up, and yes, I’d be pretty excited.
I’m guessing my heart would be racing much faster after finding the $20 than seeing the $2,024 in my brokerage account.
Why is that?
Spending
I also have spending limits for myself.
I’ll pass a gas station that is selling mid-grade gas for 10 cents per gallon more than the station down the street. If I’m putting in 15 gallons, I’ve saved a buck fifty by taking the risk of running out of gas and being stranded on the side of the road.
I know this, but I still do it.
At what price, do I start to have a discussion with my wife about a purchase? Certainly I do about a new car, but I did when I bought a new $399 iPhone SE.
This is also highly contextual. We didn’t debate the new car insurance policy that cost more than $3,000. Or the mid-winter electric bill that was $300. Why not?
Investments
So back to investments.
Why is 10 cents per gallon or a $20 bill significant but a $2,000 gain isn’t.
And to relate that to last week’s post, why is it not significant when our equity investment lags the S&P 500 by a few percentage points? That could be a several thousand dollar impact.
Wrap Up
I’m 62 and can withdraw penalty-free from my IRA. I could sell Axon today, take that $2,024.54 in cash and buy a meatball sandwich and a beer every day for 100 days. I’d also have to pay taxes, so maybe 75 days.
Why is that less significant than the 10 cents per gallon that I risk my safety for?
I have no answers – what do you think?