Counting Turkeys


For me, November is all about gearing up for Thanksgiving, and the holiday season. What comes to mind when I think about Thanksgiving? Investing, er, I mean turkeys. Wild turkeys in particular, seem to show up once in a while, and they always travel in packs. Some can usually be found walking very slowly across a busy street, or even standing in the middle of the road, wondering what all that beeping sound is. Eventually, they make it across to the other side, and re-join their pack.

When it comes to investing, I’m reminded of the turkey story, by Fred C. Kelly, author of Why You Win or Lose, and is recounted in the book, How to Make Money in Stocks, by William J. O’Neil. This story is an interesting example of how an investor thinks about timing when contemplating a selling decision.

Here’s the story:

A little boy was walking down the road, when he came upon an old man trying to catch wild turkeys. The man had a turkey trap, a crude device consisting of a big box, with the door hinged at the top.

This door was kept open by a prop, to which was tied a piece of twine, leading back a hundred feet or more to the operator. A thin trail of corn scattered along a path lured turkeys to the box. Once inside, the turkeys found an even more plentiful supply of corn. When enough turkeys had wandered inside the box, the old man would jerk away the prop and let the door fall shut. Having once shut the door, he couldn’t open it again without going up to the box, and this would scare away any turkeys lurking outside. The time to pull away the prop was when as many turkeys were inside as one could reasonably expect.

One day, he had a dozen turkeys in his box. Then one sauntered out, leaving 11. “Gosh, I wish I had pulled the string when all 12 were there,” said the old man. “I’ll wait a minute and maybe the other one will go back.”

But while he waited for the 12th turkey to return, two more walked out on him. “I should have been satisfied with 11,” the trapper said. “Just as soon as I get one more back, I’ll pull the string.”

But three more walked out. Still, the man waited. Having once had 12 turkeys, he disliked going home with less than eight. He couldn’t give up the idea that some of the original number would return. When finally only one turkey was left in the trap, he said, “I’ll wait until he walks out, or another goes in, and then I’ll quit.” The solitary turkey went to join the others, and the man returned, empty handed.

(End of Story.)

So when you’re sitting at the Thanksgiving table, enjoying a nice turkey dinner (the one that didn’t get away), think about your investment strategy, and your approach to selling. As an investor, it is wise to buy and hold for the long-term, and ride out the downturns, but not in every case. In order to minimize risk, sometimes you have to cut your losses. In other words, stop counting turkeys.

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