What does ‘You pays yer money and you takes yer chances’ mean?
It means that when you do something that involves taking a risk, you cannot control the outcome, so you may win or lose and you should accept that.
William Safire, New York Times:
YOU PAYS YER money and you takes yer choice,” I wrote in this space recently, using what I assumed to be an old Americanism meaning, as the odds makers say, ”Pick ’em.”
Mark Twain used the saying in 1884, at the end of chapter 28 of ”Huckleberry Finn,” I am informed by Richard Bliss of New York City: ”. . . here’s your two sets o’ heirs to old Peter Wilks – and you pays your money and you takes your choice!”
The origin, as dozens of other Lexicographic Irregulars stepped forward to say, is British, probably Cockney. The first time the saying saw print was in an 1846 Punch. A cartoon entitled ”The Ministerial Crisis” has a showman telling a customer, ”Which ever you please, my little dear. You pays your money, and you takes your choice.”
The phrase still means ”The right of choice is to the buyer,” or a more sophisticated ”Power belongs to those who have paid their dues,” but a much different sense has emerged. ”The phrase is used today,” writes Edward C. Stephens, dean of Syracuse University’s Newhouse School of Public Communications, ”not so much as an invitation to choice as it is a rejoinder to complaint. It seems to be similar in intent to ‘You made your bed, now lie in it.’
Case Study 1
Jamie B., a real client of mine, was unhappy with the performance of the portfolio we jointly designed a year earlier. He was upset, and he demanded that I refund my fees. When I told him that there are no guarantees in the investment advice business he became even more belligerent. He argued that somehow I had deliberately recommended stocks that I knew would later turn out to be losers. Can you see the twisted logic in this argument? I have no incentive to recommend stocks that I think will be losers in the future. If I did, I would have no loyal clients, no repeat business, and no recommendations to friends and families – the lifeblood of every advisor. I fired Jamie and told him that he could file a formal complaint against me. He didn’t.
Case Study 2
Katherine D. was also a real client. At the tender age of 36 she inherited several million dollars from her late father. When we first talked, she told me that she had hired and fired several investment advisors on the basis of under-performance. I took a different tack with Katherine.
I told her that there were no guarantees in the investment advice business, except for con men and charlatans who promised the moon at very little risk. She appreciated my candor, and away we went.
Six months later she called me to say she was disappointed that her portfolio was lagging behind the market. I tried to explain that short time frames are not useful for evaluating portfolio returns, but she insisted that I sell everything and start over with “good” stocks. I fired her the next day.
Case Study 3
Franklin K., another real client, was a major egghead – meaning that he was a certified genius, rocket scientist, and the smartest client I ever took on. I spent months explaining the whole “no free lunch in investing” concept and he kept nodding his head (metaphorically) in agreement. But alas, he turned out to be as myopic as the others in this tale. What’s interesting is that this was a very bright and well-educated man, and yet he still couldn’t see the value of long-term strategy above short-term tactics.
Final Thoughts
Investing, when done right, is a long game with no guarantees of success. That’s the nature of risk. In my book I have both long and short term investors. The long term investors outperform the short termers by a mile. And their costs are lower. And they don’t have to tinker with their portfolios frequently. Some of my short term traders do very well, beating the market by 3-5% per year. These successful trader types have one thing in common – a plan.
A well-designed plan will give any investor an edge because 90% of investors don’t have one. Here’s an example of a plan that was elegantly designed by a client:
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End of Month Rules of Trade:
On Last Day of Each Month determine Bear Market Probability % for the upcoming month, then:
When Bear Market Probability Gauge is between 0 and 30%, invest in all categories which are greater than their 10 month SMA. Invest any funds which are below their 10 month SMA proportionately in Domestic Stocks, International Stocks and REIT’s only, provided that these categories are above their 10 month SMA’s.
When Bear Market Probability Gauge is between 31 and 100%, Invest in all categories which are greater than their 10 month SMA, in amounts not to exceed the percentage of available funds contemplated in this Plan. Invest any funds which are below their 10 month SMA in cash.
Intra-Month Rules of Trade:
At any time of the month, if any invested category fall’s to its 50 day SMA, sell 50% of the holding, and hold the balance until the end of the month.
At any time of the month, if any invested category falls to its 200 day SMA, sell remainder of the holding.
At any time of the month, if any un-invested category subsequently rises back to its 200 day SMA, repurchase 50% of the holding.
At any time of the month, if any un-invested category subsequently rises back to its 50 day SMA, repurchase the remaining 50% of the holding.
For the Bond category allocation:
• When the Federal Reserve is actively raising the Federal Funds Rate, invest in Short Term Treasury Notes, MM Funds or FDIC insured CD’s. Strongly consider laddering such investments, with furthest maturity at 6 to 12 months, and roll over maturing instruments while Fed tightening is underway.
• When the Federal Reserve indicates a pause in raising the Federal Funds Rate, or begins lowering the Federal Funds Rate, go with IEF. Other etf’s to consider include SCHR, TLT, VCIT and VGLT.
• When recession probability is greater than or equal to 71%, i.e. “Red” investment category, only invest in Government Bond etf’s, no corporate etf’s.
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Note well: the above strategy is not a universal template for all investors. It was designed by someone with specific needs and risk tolerances. But your plan can be informed by this one, as long as you make sure that it fits you.