@mInvesotr
You are right it is related to psychology. Markets can be very emotionally and unfortunately humans are hard-wired to respond in the wrong way -- emotionally. The best way to invest intelligently is to do so unemotionally, which is actually very hard to do.
So I guess the answer to your question is how do you react to watching your portfolio? If every time you look at it it raised your blood pressure and makes you want to dump all of your stocks -- then you should look at it very rarely. If you can master the markets movements and take a more objective approach, you can check it more frequently.
Also keep in mind the way the market works is that when it's at its most emotional, that usually means it's close to a turn. The best examples are 1999 and 2009 --- a major top and a major bottom. Think of the eurphoria in 1999 and the despair in March of 2009, and I cannot think of a more crystal clear example of how you need to strip out the emotion of the crowd and think analytically.
@Scott,
This is an interesting topic. If obsessive portfolio watching is not good for wealth, then how often is considerd obsessive. Also what kind of checking rate is best? Once a quarter? Or once a year?
This topic seems to be relate to human behavior.
Re: OCD
Phoenix
4/25/2012 6:18:47 PM
@ProfR
Yes that's the best way to go. As Scott mentioned obsessing about it every time something small happens will only make you take hasty decisions and live to regret it afterwards.
LOL..."Obsessive Portfolio Watchers.."
icebreaker1975
4/25/2012 4:59:10 PM
I didn't realize that there was any other kind of portfolio watcher...LOL
@ProfR,
I think that's great experience. My collective experience in trading/investing and seeing a huge amount of research that the most common mistakes people make are 1) not cutting losses quick enough and 2) not letting winners run.
A great example is Apple. If you got in at $200 when it "broke out" in 2009 and set a stop, at say, $150, and then let it run and forgot about it... you would be doing very nicely. If you are sitting there freaking out about it every time it moved $20 you would be more likely to sell and not see the huge generational gain.
Conversely the stop-loss defines your risk and avoids getting involved in real disaster.
Re: OCD
ProfR
4/25/2012 1:33:47 PM
Phoenix,
That is what I have done. I put stop-loss orders on some stocks and I only look occasionally at my portfolio. I think this is a much better way to handle my stocks.
Re: OCD
Phoenix
4/25/2012 12:42:59 PM
@Driven
You are right. That's exactly what will happen. I suppose you can't help it at the begining when everything is new and exiciting for you. But once you get over that it is best to take a step back and let things happen. It would be prudent to have stop-loss orders in place to handle sudden changes.
Better to wait until it is nearly done to check it. Overwatching your portfoloio may lead to making some bad decisions. It is best to resist the temptation.
Portfolio angst
impactnow
4/25/2012 11:38:17 AM
Scott you hit on exactly the question I had for those that were avid watcher did it make them avid traders? If you can watch objectively and not be swayed by emotion I don't see anything wrong with checking daily but if you are driven by the latest blurb in the news media it could prove financially fatal.
@driven yes! and if you get several people involved they will fight over what to do with the lid.
The blogs and comments posted on Investor Uprising do not reflect the views of Investor Uprising, PRNewswire, or its sponsors. Investor Uprising, PRNewswire, and its sponsors do not assume responsibility for any comments, claims, or opinions made by authors and bloggers. They are no substitute for your own research and should not be relied upon for trading or any other purpose.
Tweet This