I tend to take a calculated and analytical approach to investing. My wife however, prefers to invest in companies who have great products that she uses and other people love to use as well. My investment strategy tends to lead me to buy technology companies, banks and index ETFs. My wife’s strategy would see us own companies like Second Cup, Shoppers Drug Mart, Starbucks, Michael Kors, Whole Foods Market and others. She likes the feeling of walking into a store knowing she’s a shareholder.
So which approach is better, analytical or emotional? The answer is both. To illustrate this I’ll compare 2 of my stock picks and two of my wife’s using our strategies.
Analytical:
Two stocks I bought based on more analytical data in the last 18 months were Apple (AAPL) and Atmel (ATML). Atmel is a semiconductor company that manufactures touch screen controllers for Android smart phones and tablets. Both were growth stocks with good valuations to peers, high revenue growth rate and impressive share performance. In the last 12-18 months Apple has been a tremendous growth story (+80%) while Atmel has languished (-60%).
While there are many reasons why each stock performed the way it did, consumers` emotions played a huge part. People love Apple products. People do not love many of the tablets and smart phones that Atmel’s touch technology powers. If consumers don’t love a product, they won’t buy it.
Emotional:
6 months or so ago my wife and I were discussing where to make an investment and she offered a couple of suggestions. The choices were Starbucks (SBUX) and Michael Kors (KORS) based on no other reason than she really liked the companies and thought they had great products. In the last 6 months Starbucks is +2% and Michael Kors is +23%. Since I didn’t like either of these companies at the time, we decided on a 3rd option, Shoppers Drug Mart (SC) which is +2.8% in the last 6 months.
The Result
My purchases resulted in both big gains and big losses whereas hers resulted in more conservative growth with Starbucks and Shoppers or excellent growth with Michael Kors. Before being married I would never have considered these companies but now with a second opinion I would take a closer look!
In order to make the best investment decision possible both analytical and emotional factors should be considered. It is a benefit to the family if both partners are involved in investment decisions. Not only should your portfolio performance improve but both parties will also feel involved in the management of finances.
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