Are you investing if you are monitoring your stocks all the time?
I invest in equities in the Singapore Exchange (SGX) but I work in an office environment. As I am exposed to the SGX, I have one of my internet explorer windows open to the poems stocks section where I monitor the daily gyrations of my portfolio as I do my work.
I have the internet down, I have the internet down
Today, something interesting happened... The internet was down for a few hours! Imagine that, 120 to 180 minutes where I did not know if the stock market had plunged, if my equity portfolio had been totally wiped out or made 100% gain in those 2-3 hours.
This set me thinking, are you investing or are you speculating on the SGX if you were in the same position as I was? Not knowing how much your porfolio was worth at that point in time when you needed to. For a long-term investor, do you need to constantly be monitoring your portfolio so that you can time some of your decisions whether to buy, hold or sell your stocks and shares at that point in time?
Holding power and your investment objectives
The key to answering this question is whether you have holding power and what exactly is your investment objectives? Holding power refers to the ability to let your investible savings continue to stay invested in the asset class you have chosen, be it property, equities (stocks and shares), bonds, REITS/business trusts, derivatives! (only for the sophisticated and the brave) or treasury bills and time deposits. This is a very important aspect of personal investment because without holding power, you become very easily affected by the ups and downs of the market and can be spooked into selling or buying based on fear and greed and sometimes both!
If you have holding power and your horizon is for the long-term, then the daily gyrations of market prices should not have a major impact on you if you are clear about the reasons why you are holding on to those assets that you have. In the case of equities, Peter Lynch recommends that as an investor, you should always have three reasons why you are holding on to the stock and these reasons are simple enough to explain to a child or a layman investor. If you are not able to articulate your reasons, it means that the reasons could be invalid or that you are more a speculator rather than an investor.
Your investment objectives (e.g. to beat 2 x fixed deposit rates) annually would then guide you in terms of how your respond to times when you do not know how your portfolio is doing at a specific point in time. If you have set up these from the start, missing a day or two of knowing what you are worth will not adversely impact you. This is because when you have holding power, you do not need to liquidate your portfolio until and unless the time is right for you in that you need the cash and you have decided that your ride with that asset class is over and you have reaped the targeted returns required.
Am I a investor or speculator
Today's internet disruption showed that while I claim to be an investor, there is still some speculative tendencies in me that I have to curb by holding on to my investment objectives and to keep sufficient cash in money market and cash to meet contingencies. As long as I stay true to my investment principles I should be able to handle times when I am not closely monitoring my equity assets since my investments are to fund my retirement and for my future generation.
How would an internet disruption affect you? Do share in the comments section!
Be well and prosper.
5 comments:
Yes, when I first started investing in unit trusts, my mood was affected by the daily market fluctuations. However, over the years, I became numb and not really bothered much as I can hold for a long period.
starlight
Oops, I forgot to mention about the internet disruption. I simply could not live well without internet because I wanted to know how were the markets doing all the time.
Thinking back, is this necessary for a long-term investor.
starlight.
Hi starlight
Thanks for your illuminating comments! :-)
I think a balance needs to be struck between monitoring daily and having a view on the overall trends.
We do need to exit the market at certain junctures in our life and monitoring would help us in that regard.
But it tends to encourage a speculating mentality in my case so I am trying to be more Buffetish to buy quality stocks and hold for the longer term.
someone once said if you are looking at your counters every minute, you are working for the money rather than letting money work on its own and for you. i believe this comes from an investment stand rather than a trader's. sure, look at news to know how things are going, but if you plan to hold for 6 months to a year at least, why look at it every minute? no such thing as upside but no downside. there will be bumps along the way.
the art of not being emotional in the market, and playing with your head not with your heart, is something one should try to achieve.
my 2 cents worth :)
-- charlesming
Hi Charlesming
That's an sharp observation. Yes, if you are monitoring 24x7 your stocks then it's still "work" right? :-)
I think there's room for a bit of both. Occasional stock picks but mostly buy for the dividends and long-term growth.
Be well and prosper!
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