Numbers & Dollar Signs

November 09, 2022
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Suppose you commission a psychological study. Recruit a handful of participants and find a few cameras to record facial expressions and an electroencephalogram to measure brainwaves. Then measure emotional reactions when the participants are shown common symbols. I hypothesize that when you show them symbols such as “!,” “@,” “#,” “&,” or “%” you won’t get much of a reaction. No change in facial expression. Little activity on the EEG. Perhaps some boredom.

Then you show them “$.”

I think you would get a big reaction. At least compared to the other symbols. A change in expression. A spike in electrical activity in the brain. There’s something about that dollar sign. It evokes an emotional response. It means something to all of us.

Then the next step. Compare the reaction of the participant seeing “1,000,000” and “$1,000,000.” I bet that’s different too. There are big numbers and then there are big numbers with dollar signs in front of them. Completely different. That little symbol changes the whole game. It symbolizes opportunity, greed, status, dreams. Much more interesting and emotive than a percentage sign.

Granted this is all a hypothesis. Developed by someone with no practical training in psychology. I’ve read a few books I suppose. But I bet you suspect I’m right. I bet most psychologists would too. Perhaps they wouldn’t bother commissioning the study. Too obvious. Like measuring people’s mood when it’s overcast. Of course they’re less happy when it’s cloudy. No point wasting time with a study.

Perhaps we should remember that. When dealing with numbers attached to dollar signs, logic goes out the window. Almost like that little symbol and logic are inversely correlated. We forget not all numbers with dollar signs in front of them are equal. They often represent different things. That seems important.

My first foray into money was a checking account at Wachovia. I deposited the $20 bills people gave me for mowing their yards and the $5 bills they tipped me for filling their boats with gas at the marina. Summer jobs. Bank accounts are simple. I login to my banking app and see a number with a dollar sign in front of it. That number represents cash. Dollars. If there is a “1,000” with a dollar sign in front it, then I can spend $1,000 on my debit card. Or go to an ATM and request 10 $100 bills. If I spend $100 on my debit card, my online account will soon show a “900” on the other side of the dollar sign. Intuitive. Simple. Controllable.

Fast forward a decade or two. Wachovia no longer exists and now I have an investment account as well as a checking account. Checking my investment account is quite similar to checking my bank account. The tech guys would say it’s a similar user experience. I log into my app for my investment account. The first thing I see there is the first thing I see on my bank app. A number with a dollar sign in front of it.

Except that number is different every time I check it. Sometimes it’s higher than the last time I looked. That’s nice. But sometimes it’s lower. That number has been going down lately. Quite a bit over the last 6.5 months. Much like yours, I presume. We humans are all different, but there are two things we have in common. We like bigger numbers attached to dollar signs. And we hate numbers attached to dollar signs going down.

We think of the numbers and dollar signs in our bank accounts and investment accounts as the same. That’s a mistake. An innocent mistake, perhaps. Remember, that little dollar sign messes with our logic and reason. Not all numbers with dollar signs in front of them are created equal. Even if it’s the same number.

The numbers attached to the dollar sign I see when I login to my investment account are different. It’s a value quoted in dollars, but it doesn’t represent dollars themselves, like my bank account does. It represents my ownership stake in hundreds of companies. Not just any companies. The greatest companies in America and the world. The market value of my ownership in these companies changes second to second, minute to minute, and day to day based on how much other people will pay for it at that moment in time. The number with the dollar sign in front of it may be ~20% lower than it was at the beginning of the year, but my ownership stake in those companies is exactly the same.

As long as I haven’t sold any of my ownership. I haven’t.*

Here are the top ten underlying holdings in my portfolio (all held in exchange traded funds - ETFs) and their stock price change as of this writing year to date (as of this blog's original publishing date in July of 2022):

Apple (-16.95%), Microsoft (-24.06%), Google (-24.38%), UnitedHealth Group (+4.12%), Exxon Mobil (+43.73%), Berkshire Hathaway (-7.61%), Tesla (-31.71%), Amazon (-31.76%), Johnson & Johnson (+3.15%), and Meta (-50.28% - formerly known as Facebook).

Change in the market value of my portfolio this year: ~-20%

Change in my percentage ownership of the great companies of America and the world: 0%

The important question is: do I believe the value of my ownership of these companies is worth 20% less than it was on New Year’s Day?

Sounds like a foolish question when I type it out… Of course I don’t.

My stake in Amazon is down about 32% this year. Imagine me sitting in a meeting with Jeff Bezos excoriating him regarding his company’s performance this year and telling him I’m selling my stock.

Laughable. For two reasons.

The first is that Amazon is a public company and Bezos neither knows nor cares who I am.

The second is the idea that the long-term value of my ownership stake in Amazon is worth 32% less than it was on New Year’s Day is... Well, laughable.

At least I think it’s laughable. Though I haven’t done a deep dive into Amazon’s balance sheet. My thinking here is pretty elementary. E-commerce is huge and it’s likely only getting bigger. Amazon owns that space. 56.7% of online retail purchases in the US were made on Amazon in 2021. Their next biggest competitor, Wal-Mart, has a market share of… 6.2%.[i]

So I’m quite happy to own a piece of Amazon, even if the market value of my ownership is down about 32% on the year. I still own the same amount of the company. But successful companies get disrupted all the time. Netflix bankrupted Blockbuster. Apple disrupted multiple industries. Remember Garmin GPS and digital cameras? Therefore, Amazon is only about 2% of my portfolio. I own hundreds of other companies too. And the market value of those companies collectively is down about 20% year to date. The number with the dollar sign in front of it in on my app is 20% smaller than it was in January.

But the idea that the long-term value of my collective ownership of hundreds of great companies is worth 20% less than it was seven months ago strikes me as downright absurd.

So I’m going to keep buying.

Sean Cawley, CFP®

*I’ve been happily adding to my ownership, in fact.


Neither asset allocation nor diversification guarantee against investment loss. All investments and investment strategies involve risk, including loss of principal.

Content here is for illustrative and educational purposes only. It is not legal, tax, or individualized financial advice; nor is it a recommendation to buy, sell, or hold any specific security, or engage in any specific trading strategy. Results will vary. Past performance is no indication of future results or success. Market conditions change continuously.

This commentary reflects the personal opinions, viewpoints, and analyses of Resolute Wealth Management. It does not necessarily represent those of RFG Advisory, clients, or employees. This commentary should be regarded as a description of advisory services provided by Resolute Wealth Management or RFG Advisory, or performance returns of any client. The views reflected in the commentary are subject to change at any time without notice.

[i]https://www.pymnts.com/news/retail/2022/amazons-share-of-us-ecommerce-sales-hits-all-time-high-of-56-7-in-2021/