Learning about risk - the hard way

(Fortune Magazine) -- I am not a player. I work hard for my money, and I can't stand to lose it. I don't even enjoy poker, because to play you need a certain attitude, so you can say, "Hey, I lost $200 but it was a fun evening, so it was worth it." When I lose, I say to myself, "Schmuck. You lost."

This way of thinking has been shaping my investment decisions for the past five years or so. I like banks, for instance. They seem a little risky right now, but what can you do?

I also favor instruments that are triple-tax-free and insured. Even those seem dicey of late, since I am now aware that insurance companies can fail. But all in all, banks, bonds, the occasional piece of real estate that I actually live in ... these are the ways I save and protect the lint balls, assorted pieces of string, and old rubber bands that I have accumulated over a lifetime of backbreaking, soul-destroying, gut-churning labor.

Last summer I got a call from a lady at an institution where I have a smallish savings account. "I'm looking at your account," said the woman, whom I'll call Betty, because that is not her name. "We could be doing so much better for you than the 3 1/2% you're now getting. That's ridiculous."

I hate being ridiculous. And since this was about the tenth call of this nature that Betty had placed to me on the issue, I said, "Okay, fine. I'll come in." So I did. That was when I met Ken. "This is Ken," said Betty. "He'll be managing your account."

Ken was big and warm and booming and seemed like a great guy. Ken showed me charts that were very colorful and demonstrated the historical growth of their funds over time. "Given your risk-tolerance level, I think we can get you into the high single or low double digits real soon," he said. That sounded pretty tasty.

I put a nice chunk of change in the Huge Growth Mid-Cap Aggressive Wowsers account I established with Ken. I figured, Hey, if I'm going to make a bet for a higher return, I should wager enough to produce a good payout, right?

Stooge! Numskull!

The first statement came, and the return was about the same as my savings account. I called Ken. "You gotta look at the annualized copranchy on the mung bean," Ken said. This soothed me.

The next statement revealed that I had lost two grand. Hmm. I called Ken and yelled at him. "The equity markets are going through a little readjustment on the soft tissue underlying their garbishnord," he explained. I thought he was probably right. "Besides," he said, "when things are down is not the time to sell, it's the time to buy." I remembered reading that such is the strategy Warren Buffett employs to build value. So I doubled down.

Dork! Boob! Stupidhead!

The next statement was in December. My Supercalifragilisticexpialidocious Growth fund had lost 15% of its value. I called, more in sadness than in anger. Ken was on vacation, but I told the fellow covering for him that I wanted to put everything back into my old stinky savings account. "Oh," the young voice with the Indian accent replied, "I will do as you wish, but that is not the smartest thing to do when the market is making an adjustment."

I listened to the kid. What he said made sense to me. You know why? Because I don't know my butt from a hole in the ground. And unless you're Warren Buffett, neither do you.

Yesterday, having lost some $15,000, I called Ken. He didn't argue when I told him to close the Totally Awesome Demento Pot of Gold fund. He did observe that nothing was doing very well in the equity world right now, and I agreed with him.

I knew there was risk. I'm a grownup. It's what I get for trying to pretend I'm not a loser.

I guess the moral of this story is that if you are inherently doomed - if such is your inexorable fate, always, without fail - don't play. Of course, you don't have to listen to me. In fact, you'd be a fool to do so.

Last month I bought Google at $700.

STANLEY BING's latest book, crazy bosses (Collins), is available at finer bookstores everywhere. He can be reached at stanleybing@aol.com; for more Bingstuff, go to his website, stanleybing.com.