Accidental Investors and Heirloom Securities
Sep 15 2009
Some of our most cherished family possessions are those that have been passed down, generation to generation. An old pocket watch or military decoration may not possess any intrinsic value but it can be a priceless memento of a beloved relative. Unfortunately sentimental value can be misapplied.
Take, for example, inherited shares of stock. The deceased may have been a savvy investor or may simply have acquired shares from his employer. How or why he bought the shares may have been important at one time, but no longer.
His heir has now become an “accidental investor.” It is doubtful that this heir would have chosen these shares on his own. In fact, it is likely that he has very different investment objectives than did the deceased. Elderly investors generally own income-oriented investments which are appropriate for their circumstances but are really not suitable for younger investors who can benefit more from growth-oriented securities.
Nevertheless, having inherited these shares, some people mistakenly begin to treat these securities like family heirlooms. There have been times when I have advised clients to sell inappropriate investments only to hear “Aunt Minnie left those shares to me so I could never sell them.” But if I asked if that would also apply to Aunt Minnie’s 2% passbook savings account the answer was generally “of course not!”
Sentiment has its place but not when it comes to investments.
