Emotionally attached to investments

[David1961]

When my grandfather passed away about 43 years ago, he willed me some shares in a mutual fund. Since then, all of the distributions have reinvested into more shares. So obviously it has grown a lot. The problem is it is not a good fund and my financial planner has recommended to me that I sell it many times. Looking at the numbers, this fund represents less than 0.5% of my entire portfolio, so it is really not even on my radar screen. Plus, it has tremendous sentimental value to me. So I’m not planning on selling it. I know one of the rules of investing is not to get emotionally attached to your investments, but I just can’t help it. I’ve thought about selling some of the shares, but, then again it is a very small portion of my portfolio and this particular investment is not going to make or break me.
Has anyone ever been in a similar situation?

[OAG]

My Mother left about $30K (market value) in old telephone stocks (her basis was about $3K) - she even had the stock certificates. It all went to me in her will but she had told me many times during her life time that she wanted the stock to go to her grandchildren (my kids). I never asked anyone, I just sold them, then divided the proceeds by 3 (3 grandkids) and wrote them checks. Two sons promptly invested the money and almost as promptly lost it in the tech crash. One daughter still has the money in a separate account and calls it "Grandma's money" - she is the sentimental one.

The way I look at it is that my Mother wanted the kids to have the "money" from the stock and not necessarily the stock and as it turned out it was a good move to sell it (look at the phone stocks in the 95-96 time frame).

[Dawg52]

One thing my Dad told me before he died was not to lose his money in the stock market. So I have maintained my mother's brokerage account as he wished. I will probably continue with fixed income investments when I eventually inherit my portion. I would feel terrible if I lost some of it in stocks.
I really won't need to invest it in stocks anyway as I will have enough in my current portfolio to give me enough growth.

As to your situation, I would keep the fund. It's only .5% of your portfolio anyway.

[armor99]

Just remember one thing... as this is something that I have watched my father do. It certainly IS possible to conserve yourself..... right into the poor house. My father for most of his life has been so obsessed with not loosing any money at all, that almost all of his investments are in I bonds I think. At least this is the impression I am getting. He is of that generation that will never discuss finances with his children. The point being that to retire early, or to retire at all for that matter, you MUST invest in some percentage of stocks, or riskier things than bonds or money markets. Sometimes being too short term "risk adverse" can hurt you severely in the long run. As a younger investor it gives me a bit of fear that as of today I am down -7.4% for all of my invested assets. And this is just the first month of the year! But then I take a deep breath and remember that my time horizon is at least 15 years, and if you look to the past to predict the future, then I am certainly doing the right thing investing the way that I am.

[ats5g]

If you find that you're having trouble with selling assets given to you by family, I'd recommend reading Why Smart People Make Big Money Mistakes by Belsky and Gilovich.

If you find yourself answering the following questions similarly, you should probably read the book:

Scenario 1:
Q: I currrently own X [stock, bond, mutual fund]. Should I sell it?
A: No, because grandma gave it to me, or because I bought it at Y and now it's at Z.

Scenario 2:

Q: I don't currrently own X. Should I buy it?
A: No, because it's a bad investment for whatever reason(s).

X is the same investment/asset in both Scenarios, so why are the two answers different?

A personal example is that my in-laws keep buying I bonds for my 2 kids for college, etc. Q: Should we sell them and put the money into a 529 plan? Given that the kids are the owners of the I bonds, I/DW would be the owners of the 529, and we wouldn't take the money we'd be putting into a 529 for the kids and buy I bonds, we should probably sell the I bonds and put the money into the 529. The 529 is the better savings vehicle for the kids' college than I bonds that the kids own.

- Alec

[ats5g]

Quote:

Originally Posted by armor99 Just remember one thing... as this is something that I have watched my father do. It certainly IS possible to conserve yourself..... right into the poor house. My father for most of his life has been so obsessed with not loosing any money at all, that almost all of his investments are in I bonds I think. At least this is the impression I am getting. He is of that generation that will never discuss finances with his children. The point being that to retire early, or to retire at all for that matter, you MUST invest in some percentage of stocks, or riskier things than bonds or money markets. Sometimes being too short term "risk adverse" can hurt you severely in the long run. As a younger investor it gives me a bit of fear that as of today I am down -7.4% for all of my invested assets. And this is just the first month of the year! But then I take a deep breath and remember that my time horizon is at least 15 years, and if you look to the past to predict the future, then I am certainly doing the right thing investing the way that I am.

armor99,

You don't necessarily need to invest in stocks to retire, or even retire early. Think about all those investment bankers or Hedge fund peeps making hundreds of thousands or millions of $$ per year. They probably wouldn't want to invest their portfolio in stocks, because the stocks may be highly correlated with their income. They probably would want to invest their portfolio in less risky assets, like Treasuries and TIPS, which would likely do great if the markets tanked and they lost their jobs. Also, it's quite likely that they don't need a high return on their portfolio to ensure a comfortable retirement.

IMO, I bonds are possibly one of the safest ST and LT investment. Their tax deferred, there is no reinvestment risk, returns CPI-U linked, and their value will not go down in the case of deflation. If your dad bought the I bonds back when the real yields were over 2%, probably not a bad investment. IMO, there's nothing wrong with not investing in stocks if you don't have to.

- Alec

[Meadbh]

There are three factors involved in the answer to the OP's question.
1. Is it a meaningful amount of money?
2. Is it a good investment?
3. Does it have sentimental value?

The OP's answers appear to be:
1. No
2. No
3. Yes
In the context of #1 the OP is putting the greatest emphasis on sentimental value.

When I was faced with a similar situation the answers were:
1. Yes
2. Mediocre, and not consistent with my AA
3. No, it's just money.
So I cashed in the shares and reinvested the money according to my AA.

YMMV

[Hamlet]

My grandfather gave me 3 shares of Fastenal (FAST) for my 18th birthday. They were worth about $50-$60 total. That was about 17 years ago, and those 3 shares are now 48 shares trading for $40 each.

They'll have to pry those shares from my cold dead hands.

[MooreBonds]

David1961 - it's good to see an emotional attachment to things connected to your family.

However, remember that one should probably view this in an 'indirect' way, rather than a 'direct' emotional attachment, since when you get right down to it, you have absolutely no control over the item.

If you were talking about 'direct' tangible items - land, a house, a vase created by Louis XVI's personal artist - it would be completely different. However, you're talking about mutual fund shares which are entirely OUT of your control. The fund manager could really screw up and drop the fund's value...or they could even do 'average', and let their high fees eat away at the fund's value. This makes the mutual funds (IMO) an 'indirect' asset, and which should not have much emotional attachment at all.

Think about it in terms of a racing horse: what if your grandfather willed you a racing horse, except you had no control over how the horse was trained, fed, conditioned, or raced? Your father's jockey made all the decisions as to what the horse did, etc., and you couldn't even visit it to ride it around - all you had was a picture of it on your wall to look at. You are essentially in control of nothing, which could easily be neglected into an old horse, and end up being a liability. Sure, it might have some emotional attachment, but you have absolutely no control over anything related to the horse (and you can't even visit it!) - so it's almost like it might as well not even be yours.

If you want, frame the original mutual fund certificate or monthly account statement as a reminder of what your grandfather gave you to start with, and then put the money into the best opportunity you can find (for your given needs). After all, I'm sure your grandfather received some money from his father/grandfather - what if he had simply framed that money and did nothing with it? (ignoring the collectible value of old paper currency)

My point is - hard assets are one thing, but an investment like this is an entirely different situation. I'd say just have an attachment to the person and what they enabled you to START with. Don't keep the mutual funds simply because they were given to you (unless the funds are low-cost/excellent track record/etc.).

Quote:

Originally Posted by David1961 Has anyone ever been in a similar situation?

I suppose the closest thing I've been in so far was when my grandfather passed on and left my siblings and I some EE savings bonds (purchased back in the early 80s when rates were 7%-9%!). After they doubled the first time, the rate reset down to a market rate (2%-4%), so by the time we received them, it was a no-brainer to redeem them and redeploy them in higher-earning investments. That, and I was in school at the time, so my low income allowed me to pay taxes on the interest when I was in a much lower tax bracket. (Plus, with savings bonds, they stop earning interest after 30 years, so you HAVE to cash them in eventually, whether you want to or not). Thankfully, I wound up putting a good chunk of them into the new (at the time) I-bonds, which were offering 3.0%-3.6% real yields. If only I knew how good of an opportunity they were at the time!

Tangent: An interesting thing I learned (which I wish my grandfather had looked into, given how interested he was in saving on taxes) was that you can actually declare savings bond interest EACH YEAR and pay taxes on it. If I had done this in the 80s/90s growing up, I would have paid $0 in taxes then and when I cashed them in, since the interest earned every year would have been below my annual individual deduction/exemption.

So, if any of you have savings bonds that you're planning on leaving to children, look into letting them declare the interest earned each year while they're young/have low income.

[LOL!]

As Alex wrote above the Why Smart People Make Big Money Mistakes is a great book. I can't imagine that one's asset allocation and investment needs would be anywhere similar to a deceased older relative's. That statement alone should get you past the 'sentimental value' factor.

Not only are mutual funds and stocks something to considering trading away, but also land, homes and other real estate. "It's been in our family for years" is not a legitimate reason to keep something.

Start your own traditions and do not penalize your heirs with statements like, "Never sell this." Indeed, make sure your heirs know that they can sell anything you will to them if they wish.

[VaCollector]

David1961, with the amount being such a small portion of your investments, it would seem that the sentimental value would outweigh the investment value.

My vote is that you keep them and enjoy all of the memories that come along with them!! ....maybe with the idea that they should be passed on to those "down the line" with a story or two about those that have come before us

[Nords]

Quote:

Originally Posted by David1961 When my grandfather passed away about 43 years ago, he willed me some shares in a mutual fund. Since then, all of the distributions have reinvested into more shares. So obviously it has grown a lot. The problem is it is not a good fund and my financial planner has recommended to me that I sell it many times. Looking at the numbers, this fund represents less than 0.5% of my entire portfolio, so it is really not even on my radar screen. Plus, it has tremendous sentimental value to me. So I’m not planning on selling it. I know one of the rules of investing is not to get emotionally attached to your investments, but I just can’t help it. I’ve thought about selling some of the shares, but, then again it is a very small portion of my portfolio and this particular investment is not going to make or break me. Has anyone ever been in a similar situation?

When my grandfather died in early 2002 he'd been in full senile dementia for about 14 years. My father had been taking care of the finances and he disclaimed the remaining estate, which gave my brother and me our portions of Grandpa's cherished Fidelity Contrafund and PNC Bank shares (held through many years and, in the case of PNC, many mergers/buyouts). It was a couple months' salary, an amount that would neither make nor break our plans.

My brother's shares rebounded nicely over the last few years and AFAIK he's held on to them. No incentive to do anything.

I cashed out and was better rewarded by buying Berkshire Hathaway than by holding the old investments. But there was no sentiment attached to the issue.

Your grandfather won't complain about your decision, so it's all up to what makes you sleep well at night.

If your grandfather was your age today, in your financial situation, and equipped with your knowledge, would he hold on to this loser? If not then neither should you.

Is there some other possession or activity that the two of you enjoyed together that you could enjoy again (in his memory) by cashing in the shares? That may be more important than their sentimental value, even if it's just a fifth of Jack Daniel's. Or maybe a really nice pickup truck with a bumper sticker proclaiming "In Loving Memory of..."

Would the sentiment be of a more concrete value if you could hold the mutual fund shares in their certificate form, and then frame the certificate for a wall display?

In my case I'm holding on to parental possessions that I'd sooner be rid of. Surely someone on eBay wants to buy an old slide rule or old books, funding a nice family dinner or a new longboard. I just haven't made the time to take care of it, and it's partly because I don't want Dad inquiring after his old slide rule when I've already sold it.

[haha]

Quote:

Originally Posted by armor99 Just remember one thing... as this is something that I have watched my father do. It certainly IS possible to conserve yourself..... right into the poor house. My father for most of his life has been so obsessed with not loosing any money at all, that almost all of his investments are in I bonds I think. At least this is the impression I am getting.

Depending on what is the base rate on these I-Bonds, this might be the best of all possible retirement investments. Only inflation adjusted instruments are actually designed to deal with inflation stress. I have some at 3% over inflation; I think some on the board have up to 4% over inflation.

Ha

[twaddle]

The highest real coupon on i-bonds was 3.6% for the May 2000 issue. I have some, but they wouldn't let me buy enough of them to retire on.

I think I bought them online with a credit card and got a cash rebate. Man, those were the days.

[clifp]

Quote:

Originally Posted by twaddle The highest real coupon on i-bonds was 3.6% for the May 2000 issue. I have some, but they wouldn't let me buy enough of them to retire on. I think I bought them online with a credit card and got a cash rebate. Man, those were the days.

Yes those were the days 3.6% real rate and 1% cash back from my discover card and 45 days of float. The problem was they only sold them in $500 amounts so you had to enter your information over and over again. I got bored and only bought a half a dozen and along with an equal number of 3.4% ones in the 2000 and 2001.

[lazygood4nothinbum]

before inheriting and learning about this forum and wondering what to do, i thought i'd take the money and set up a biz for property rental income. i was going to name the company thankyoumom llc.

meanwhile i keep getting these statements on the inherited ira for "the estate of my mom, deceased" and on the yearly statements the reason for my withdrawals is not titled "required miminum distribution" but instead it just says "death".

i'm not so sure i want my bank putting that in my face for the rest of my life.

i'll always love ya mom, and this might not be such a good financial decision either, but now i'm thinking about running that account down first.

[MooreBonds]

Quote:

Originally Posted by lazygood4nothinbum i'm not so sure i want my bank putting that in my face for the rest of my life. i'll always love ya mom, and this might not be such a good financial decision either, but now i'm thinking about running that account down first.

LG4NB, I don't know all the tax ramifications about transferring an inherited IRA into a ROTH (versus just rolling your own IRA into a ROTH), but since you aren't slaving any more, is your tax bracket low enough to transfer part/all of your mother's IRA into a ROTH IRA? that way you won't have to take the RMDs (unless you're using the RMDs as part of your anticipated budgets).

[lazygood4nothinbum]

hey moorebonds. thanx for suggestion. i was really just sort of kidding but also relating to how emotions can override otherwise sounder financial decisions and wondering, hey, it might be worth the loss.

as i've been living on cash for a while now my tax bracket is rather embarrassingly low these days. but unless i researched wrongly, i don't believe i can escape rmd's unless i spend down the account which i won't likely be doing. as an inherited ira never really belongs to the heir in the same sense as one's own ira would be owned, there is no rollover to roth option.

[Milton]

Quote:

Originally Posted by David1961 When my grandfather passed away about 43 years ago, he willed me some shares in a mutual fund. The problem is it is not a good fund and my financial planner has recommended to me that I sell it many times. Looking at the numbers, this fund represents less than 0.5% of my entire portfolio, so it is really not even on my radar screen. Plus, it has tremendous sentimental value to me. So I’m not planning on selling it.

Obviously you already know that it is not smart to hang on to poorly performing investments (not sure of the details, but you confess that it is "not a good fund"), so I won't go into that. In any case, you point out that this is not large enough to make much of a difference in your life, so future performance is not terribly important.

I wonder how much sentimental value can really attach to mutual units, which are completely fungible. In other words, they have no special characterstics identifiable with your grandfather, and can be instantly replaced with identical duplicates. Also, they are not even tangible, physical assets (like, say, gold coins, or share certificates) ... they're merely ever-changing numbers printed on a new statement every month or quarter.

However, sentiment is a very personal thing. If receiving the statements honestly gives you significant warm feelings towards your long-dead grandfather, than keep the mutual fund units, and politely tell your financial planner to stop pestering you about it (briefly explain that it is a purely emotional decision, you know that, your mind is made up, and you don't want to be bothered with logic).

On the other hand, personally I try to keep my investment paperwork to a reasonable minimum, and would dislike having to keep track of a mere 0.5% interest: which is much more trouble than it's worth. And I know that it would bug me to have regular reminders of how the management of a poorly-performing mutual fund is making a sucker of me extracting fees from me.

One option that you might consider is selling the mutual fund units and spending the money on something as a fitting memorial to your grandfather. E.g., you could splurge on a really nice piece of furniture, painting, etc., that will always remind you of him. Or say he was in the military during the war: you could donate the money to a veterans' group in his honour, or something like that. My point is that if you sell the mutual fund units you need not reinvest them in other, equally fungible (and ultimately meaningless) financial investments; you can use the money to make a small but real difference.

Just a few thoughts ... I hope that you may find them to be helpful.

Milton

[vinnieg24]

ill just add in my two cents from all these great posts. but he probably wanted you to have the money. so i wouldn't worry about holding on to it....good luck