A Principle for the Octogenarian Investor

153980318“What do those initials stand for?”

My Uncle Bob posed this question while pointing at the hard cover of my first-year Latin textbook. I leaned forward for a closer look at the image of a helmeted Roman centurion astride a white horse. Uncle Bob’s insistent forefinger tapped the four letters, SPQR, emblazoned on a fringed coverlet draped across the horse’s flank. I jumped at the chance to display my teenage knowledge of the classics. “Senatus Populusque Romanus,” I replied. “The Senate and the Roman People.”

“They mean something entirely different to me,” he said, drawing back his finger. “Short Profit, Quick Return.”

Raised in Manhattan before World War I, my mother’s older brother had risen from a teenage Wall Street runner to an experienced stock trader. While today’s technology has made equity trading instant and impersonal, then he spent each day moving in and out of the New York Stock Exchange’s 17 trading posts negotiating stock transactions at prices favorable to his customers. Each trade netted his firm two dollars. Short profit? Quick return? You bet.

Today, as an octogenarian investor, I’m often surprised at how closely I follow Uncle Bob’s words. Although there are an endless number of variables that bear on my investment decisions, I concentrate on the one that has grown more important to me with each passing year: Life expectancy. Though I’m a lap swimmer and a weight lifter, mine is growing short. Why cling to a rising stock in the hope of bigger gains over the long run? When I accumulate profits—even small ones—I call on Uncle Bob’s SPQR interpretation and book my gains immediately. However, Uncle Bob didn’t have an investment style box to guide him. In the current financial world, the investment style box has become an indispensable evaluative tool. I’m certain he would have approved of the one below.

Style Box for Aging Investors

Style Box for Aging Investors

I consistently follow the advice expressed in the top-left box. And if my shares continue to rise after I’ve sold them, I harbor no remorse. Instead, I hark back to times when I’ve held fast to a stock, confident of mounting profits. While waiting, markets have reversed and profits have vaporized. Those defeats have not made me risk averse, but they have made me loss averse.

True, the harvesting of early profits leaves me exposed to the short-term capital gains tax. But I prefer to pay a little more in taxes than to see a profit turn into a loss. Why? Because I may not have the time to recoup that loss.

Over the decades, Uncle Bob’s commercialization of SPQR has helped me keep my risk appetite under control. In recent years, I’ve often called upon another Latin phrase to keep myself in check. Though the poet Horace composed it more than 2,000 years ago, it’s quite popular today: Carpe Diem, Seize the Day. Unfortunately, T-shirts and bumper stickers don’t provide enough space for Horace’s complete thought. It’s “Carpe diem quam minimum credula postero.” Seize the day and trust little in tomorrow. Not a bad principle when you’re at the age where your tomorrows are numbered.

  • Ed ’77

    Bob, let’s hope that you are only now entering the fourth quarter with a strong possibility of a double-overtime! Keep swimming those laps and pumping that iron. Maybe it’s time you started looking more closely at the bottom row of your 3X3 matrix!

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