Saturday, 28 September 2013

You check your portfolio everyday?


As the market rised substantially over the past month, my friends who have been rather quiet and reluctant to talk about share investment sprang back to life. They started commenting, exclaiming ‘wow xxxx rised another 10 cents today! Ho Seh la!’, or lamenting ‘Shit! Yyyy fell 3% today’. It is strange as just 1 month ago they seem rather low-spirited and kept mum about their portfolio when casually asked:  how did your investment go?

I noticed this common behavior present among majority of the retail investors. I used to behave this way too.

I was ultra-concerned about my portfolio performance in the past, wanting to know how much had it increased from previous day, and the individual stock’s rise or fall. It used to by my daily mental supplement, checking my mobile broker app several times a day. Kind of addicted to it.

Furthermore, I was rather affected by my portfolio movement. I felt excited to see my portfolio rised, or frustrated to see the prices fell, and would share it with my peers which led to some lively discussion on the market movement. It was more like a social activity.

Well, it was exciting to have friends chit-chatting over stocks, laughed and cursed together while sharing our portfolio gains or loss. But, what tangible benefit does checking portfolio frequently bring to you wealth and networth? Nil. With hindsight, it was quite absurd I must say, to go through that kind of mood fluctuations without much gain.

As time passed, I managed to kick the habit, and reign in the desire and curiosity to know how my shares are doing on a daily basis. I now check my holdings once in several days and manually update my portfolio every fortnightly. I convinced myself that it is probably unwise to check my holdings so frequently with the following reasons.

We are all human beings and we are wired to experience, or even welcome, emotions such as feeling happy or upset. However, emotions are not required for your investment. It clouds your judgement and affects your decision making. What we need in investment is rational mind, logical reasoning and mental composure.

I     I invest to grow wealth and to have a more relaxed, carefree life ultimately. But I was losing sleep over my shares! Worrying whether they will fall tomorrow, speculating that it will rise  due to Dow Jones’ jump and feeling excited. It worn me out fast and I was feeling rather frustrated. This doesn’t make sense as I didn’t invest for thrill and fun. I would be better off going to MBS to gamble if I was after excitement and fun.

      Worse still, checking up on my holdings frequently did not bring me profits but brought me losses! As my mood danced along with the market swing, I forgot about the stop loss and profit-taking point which I had set for some of my trading positions. A case in point, should I have kept a distance from my portfolio, I would have been able to stick to my rules and exited with a nice 4 figure profit, instead of a 4 figure loss. Again, witnessing the price fall scared the wits and discipline out of me, and I sold at a bad time.

Whatever mentioned above, is of course, premised upon the fact that you have done your due diligence in studying the company thoroughly and have made a sensible investment decision in sound companies with well-managed risks and high chances of profits.

In short, it is meaningless to check your holdings every day. Its fluctuations are all paper profit/loss, with no tangible impact on your wealth over short term. So, detach yourself from your portfolio to remain composed and rational.

4 comments:

  1. Hi,

    Unless there is significant market movements or I am looking to exit/enter into some counters, I am trying to keep myself away from the daily gyrations of the market.

    I have to admit that when I am monitoring, it's hard not to be emotionally affected. I for one, tend to fire off more bullets than intended. =p

    ReplyDelete
    Replies
    1. Yup definitely. Transactional period calls for close monitoring of stock price. I also feel that buying requires closer attention to the price, such that u buy at damn attractive price and never have to worry much about its price fluctuations again..

      As for selling, probably selling at toppish price range will do..

      Well greed and fear do get into my ways sometimes. Thats why I wrote this article as a reminder and can refer back to it from time to time!

      Delete
  2. i check everyday as well.
    after some major corrections in the last few months, have learn the necessary art of cutting loss.
    had even gone to the point where after cutting loss, if the stock price continue to rise, i'm also more or less numb to the fluctuation.

    ReplyDelete
    Replies
    1. Good to hear! Maybe being immuned is a more positive word as numb has some -ve connotation there haha.

      Being immuned prevent us from making foolish decision. But we must be mindful of not being alert enough towards -ve development that shakes the foundation of a good company.

      Its a tough balancing act.

      Delete

What To Do If You Bought Stocks Before This Correction

Straits Times Index has not been performing well so far in 2018. Year-to-date, it has dropped 7.1% and touched a one-year low of 3,103 on 11...