This week I received an email brochure offering for sale a beautiful Cessna Citation Jet. Of course I am not now nor will I ever be in the market for a jet, but they are fun to look at. The brochure showed a gorgeous 1999 model and the asking price was just a fraction of what it sold for originally. In fact, this beautiful jet could be picked up for less than the cost of many single engine piston airplanes.
 
I showed the brochure to Launa and jokingly asked if she was ready to move up to a jet. She was in disbelief at the low price and wondered what the reason might be.  I explained to her what all pilots and plane owners know about planes, and jets in particular, especially 18-year-old ones. It isn’t about the cost to buy, it’s about the cost to own. As jets age, the cost to maintain them grows dramatically until the point where it simply is more cost effective to buy a new one. Airplane magazines are riddled with beautiful older jets that are basically being given away because the owners can no longer justify the maintenance costs. An unsuspecting owner who is taken in by the cheap price tag may be in for a very expensive surprise.
 
I recently worked with a client who had purchased an investment years ago from an advisor who made a point of emphasizing the low acquisition cost. Unfortunately, the ongoing high cost of ownership had been a serious drag on performance. This individual had failed to account for, or not been properly advised on, these high long term costs.
 
Investments have costs associated with them. Sometimes these costs come in the form of upfront commissions and sometimes they are charged by the advisor as annual management fees. Many wonder which method of paying for services is better for the client. With each situation I encourage people to consider the overall cost of ownership, and the expectations of the advisor involvement. If an investment is long term and requires little management, an upfront commission may be the most cost effective option. If you are going to want ongoing management and advice, it may be better to consider a fee-based structure that encourages an active relationship with your advisor.
 
Far too many investors have made the mistake of trying to save a few bucks up front in exchange for getting themselves into a situation with higher ongoing costs. Like the beautiful Cessna Citation in the brochure, the initial price seems very attractive, but failing to take into account the long term high operating costs could doom an unsuspecting buyer. In airplanes and investing, we must always consider not only the cost to buy, but maybe the even more important issue, the long term cost to own.

We hear a lot about the “entitled generation” of Americans, who seem to think they have a “right,” to just about everything. They claim a right to healthcare, housing, education, cellphones, internet service and so on. My purpose is not to open a political debate but to consider how this attitude could have negative effects on investor behavior and outcomes.
 
As a young child when I considered starting my popsicle sales business, my Dad gave me encouragement and great advice. One thing he made clear was that if he loaned me $5 to buy my first order of popsicles, I would be on the hook to pay it back even if all those popsicles went unsold and melted. He taught that starting my business came with the potential for success, as well as the real possibility of failure. I ran many small businesses in my youth and found his counsel to be sound. Sometimes I walked away with a wad of cash and sometimes I dumped out gallons of lemonade when a rainstorm came. I learned from the latter to always check the weather reports.
 
Americans celebrate our constitutional Bill of Rights, which by my understanding basically says that we have the right to be left alone to pursue our lives as we choose, and if we find ourselves in legal trouble, we have the right to be treated fairly.  What the bill of rights does not say, but is clearly implied by its absence, is that we also have the right to fail. Some have lost sight of that right and quite honestly, fail to see the blessing that can come from failure.
 
I heard a national commercial on the radio from a debt relief firm. The commercial said, “You have the right to settle your debt for a mere fraction of what you owe.” So I guess we can now add the right to not be held accountable for our financial decisions to our American rights. I wonder what our children are learning when they hear stuff like this.
 
I have seen investors afraid to make a move for fear of failing. They watch opportunity pass them by because they don’t want to risk having to wade through the occasional financial rain. They beat themselves up over past investment mistakes, rather than taking advantage of learning from their mistakes and making better decisions going forward. I often remind them that in investing, it’s OK to fail sometimes. I joke that mathematically you only need to be right 51% of the time to generate a positive return. No one is right all the time.
 
Investors should do all they can to get it right, but accept the fact that you will not always be right, nor do you need to be. As you learn from your mistakes you will learn to get things right more often. We have many wonderful rights as Americans and one of them is the right to be wrong sometimes, and to learn from it.