So...Was It a Good Week or a Bad Week?
The week brought bad then good for stocks. On balance, I'm not sure how things shook out. I'll get a better idea when I put together our weekly portfolio review, augmented by our monthly updating "big picture" items that help us sort through the daily noise.
We used to do the augmented report every week, but found that was too frequent. We found ourselves in the middle of the forest and saw only trees. So we've been going with monthly to see if that provides more perspective, the objective being to better see the forest.
Speaking of perspective, a recent conversation with a client highlighted our ongoing efforts to avoid getting too tangled up in the weeds when assessing how things are going, not only when it comes to our portfolios, but also in the markets in general, and, consequently, in the economy as well. We were asked how the basic benchmark we use to measure portfolio performance had done this past month. The answer - "I don't know." - came with an explanation. We check in every quarter on this, not every month anymore, and certainly not every week (as we once thought might make sense).
Again, checking items too often will likely find you entangled in a morass of data more like a cacophony than a song or symphony. And its the song we want to hear, sometimes even the symphony (when we're fortunate). The cacophony merely excites or, more accurately, jangles the nerves. And jangled nerves lead too often can lead to poor decisions. A catchy - if not even beautiful - song, on the other hand, provides some sense of order and sets the mind and heart at peace. And that helps foster proper discernment of the facts at hand. When a symphony emerges (a rare event), we've got a rich, sonorous accompaniment that allows us to make those bold moves that, while rare, need to be made from time to time.
Confused yet? OK. Let's look at it another way.
I've never understood why so many investment professionals stare at screens so much. While I spend a good chunk of time in front of a screen, it's usually because I'm reading or researching some topic, or working on a client project related to their financial planning, rather than perusing data and charts in "real time" that supposedly show you "what's happening" in the markets like right now. Maybe if I were a day trader I'd be doing this. But I'm not. And it's likely most of you aren't either.
So where does this lead us? To this: Don't constantly check your portfolio(s). Maybe once a month; better once a quarter. If you're compelled to look more often, it's likely you don't have a strategy in place in which you have confidence. If you do have such a strategy, you'll find you don't need to constantly check in. In fact, it's annoying when you do. At worst you'll wind up reacting to something when you shouldn't. Just think of what happened in October and you'll likely understand that wide and sometimes violent swings in prices might cause you to make a decision based on emotion rather than reason. And it's emotional decisions that typically screw up your investment results.
Back to what we'll look at later today. If we find something worth posting, I'll do that maybe sometime this coming week. I can't imagine anything so momentous or urgent coming up from our work later on, so there's no desire to post forthwith.
That being said, you might be interested to know that our trusted sources have kind of been all over the map lately. Their views and advice range from those seeing the present unfolding of a credit crisis, perhaps on the level of 2008 (or worse), to those claiming that stocks will enter a full-fledged last gasp bull market spike (aka a "Melt Up") before collapsing into - well, who knows what.
The one common thread, though, is that everyone's expecting what you should all be expecting: a bear market in stocks and an economic recession. It's coming one way or the other. How bad will it be? At what point in time? Sorry, can't provide that at this point.
We used to do the augmented report every week, but found that was too frequent. We found ourselves in the middle of the forest and saw only trees. So we've been going with monthly to see if that provides more perspective, the objective being to better see the forest.
Speaking of perspective, a recent conversation with a client highlighted our ongoing efforts to avoid getting too tangled up in the weeds when assessing how things are going, not only when it comes to our portfolios, but also in the markets in general, and, consequently, in the economy as well. We were asked how the basic benchmark we use to measure portfolio performance had done this past month. The answer - "I don't know." - came with an explanation. We check in every quarter on this, not every month anymore, and certainly not every week (as we once thought might make sense).
Again, checking items too often will likely find you entangled in a morass of data more like a cacophony than a song or symphony. And its the song we want to hear, sometimes even the symphony (when we're fortunate). The cacophony merely excites or, more accurately, jangles the nerves. And jangled nerves lead too often can lead to poor decisions. A catchy - if not even beautiful - song, on the other hand, provides some sense of order and sets the mind and heart at peace. And that helps foster proper discernment of the facts at hand. When a symphony emerges (a rare event), we've got a rich, sonorous accompaniment that allows us to make those bold moves that, while rare, need to be made from time to time.
Confused yet? OK. Let's look at it another way.
I've never understood why so many investment professionals stare at screens so much. While I spend a good chunk of time in front of a screen, it's usually because I'm reading or researching some topic, or working on a client project related to their financial planning, rather than perusing data and charts in "real time" that supposedly show you "what's happening" in the markets like right now. Maybe if I were a day trader I'd be doing this. But I'm not. And it's likely most of you aren't either.
So where does this lead us? To this: Don't constantly check your portfolio(s). Maybe once a month; better once a quarter. If you're compelled to look more often, it's likely you don't have a strategy in place in which you have confidence. If you do have such a strategy, you'll find you don't need to constantly check in. In fact, it's annoying when you do. At worst you'll wind up reacting to something when you shouldn't. Just think of what happened in October and you'll likely understand that wide and sometimes violent swings in prices might cause you to make a decision based on emotion rather than reason. And it's emotional decisions that typically screw up your investment results.
Back to what we'll look at later today. If we find something worth posting, I'll do that maybe sometime this coming week. I can't imagine anything so momentous or urgent coming up from our work later on, so there's no desire to post forthwith.
That being said, you might be interested to know that our trusted sources have kind of been all over the map lately. Their views and advice range from those seeing the present unfolding of a credit crisis, perhaps on the level of 2008 (or worse), to those claiming that stocks will enter a full-fledged last gasp bull market spike (aka a "Melt Up") before collapsing into - well, who knows what.
The one common thread, though, is that everyone's expecting what you should all be expecting: a bear market in stocks and an economic recession. It's coming one way or the other. How bad will it be? At what point in time? Sorry, can't provide that at this point.
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