The Sterlings (Part 5): When investing involves greed and fear

(If you haven’t read Parts 123, or 4, you can find them by clicking on the number)

Lessons of financial awareness came late to the Sterlings, who hadn’t felt the pressure to scrimp and save until faced with the reality of increasing educational costs for their two teenage children.

However, Amy and Travis Sterling have finally found balance prioritizing their competing financial goals of educational and retirement savings. By doing their research and smartly following the advice of financial pros, the couple was now sitting pretty on a growing savings while enjoying their new-found sense of fiscal responsibility.

The transition to thriftier living had been especially difficult for Amy, while Travis generally prided himself in taking a more conservative approach to spending. But the couple has now found themselves swapping perspectives, as a recent financial boost by way of an unexpected inheritance has found Travis bitten with the investment bug.

 

Amy followed the muffled sound of voices into the living room, where she saw Travis huddled on the couch watching CNBC. His expression was despondent and from the numbers displayed in red on the station’s ticker, she guessed why.

“Want some coffee?” Amy offered. Travis shook his head, so she scooted over the papers next to him and plopped on the couch.

“I think I should cut my losses,” Travis said, and Amy shifted uncomfortably while waiting to hear just how much the “losses” were.

But Travis didn’t elaborate, so they sat for a few more minutes in silence. Finally, Amy patted her husband’s knee and shuffled into the kitchen to put on the pot of coffee she hoped would help her feel slightly less grumpy at her husband’s decisions.

As she flicked on the kitchen light, Amy felt a flash of annoyance. Her decision to remodel this kitchen had been a source of several arguments. Yet, the remodel was only half the cost of Travis’ recent impulsive investment.

DigiCloud, the data storage company Travis had heard was a “hot stock,” was something Amy knew little about. However, Travis had been watching it for weeks before learning that he had inherited $30,000 from his aunt’s estate.

The inheritance had been a surprise. Travis hadn’t been particularly close with his aunt and Amy was suspicious that he’d treated the unexpected boost too flippantly when deciding to “hop on” the DigiCloud investment “train”. Nonetheless, Amy reminded herself she’d resigned to being supportive and carefully carried the hot mug back towards the sound of financial pundits discussing the recent news.

“So, how bad is it?”

“The words ‘class-action lawsuit’ aren’t helping,” Travis replied. “Basically, DigiCloud failed an audit.”

“Like, a financial audit?”

“No, a security audit. You remember several days ago when Starbucks customers were reporting fraud on their credit cards, and it turned out scammers had found a way to gain access to their financial information through the mobile app?

“Well, that’s on DigiCloud. The news hasn’t said what they did — it’s all speculation right now — but it looks like they cut corners on their security system. Also, not releasing how it happened seems to be making the panic worse… I’ve been watching the stock ticker and their shares are decreasing like a New Year’s countdown. At this very minute, I’m down twenty-three thousand dollars.”

Amy held in a panicked shriek. She’d never liked the idea of placing a big bet on one stock; it felt like throwing all your darts at once. “Travis, I think there’s something to be said for calling an advisor before you make a decision.”

Week 5 - fear-greed

 

 


 

 

Find out the advice that Finance for Teachers would give the Sterlings in this situation. Read more here.