Treat your portfolio like a bar of soap, the more you touch it the smaller it gets!
If, like most of us, you want to greatly increase the chances you'll see gains on your investment portfolio, the answer is often more simple than you'd imagine: Look at your portfolio less!
As seen in the chart, for the world’s largest share market in the US, it’s basically a coin flip whether it goes up or down over a given day.
Stretch that to 3 months though and you’ve got only a 1 in 3 chance of losing money, and to a year, then about a 1 in 4 chance of being in the red.
How about 5 years? Well now only about 1 in 10 times would you have you been down and over a decade it’s little more than a 1 in 20 chance of not posting a positive return. Those are the kind of odds we can all get on board with.
Behavioural finance suggests investors often suffer from “myopic loss aversion”. That is, they ‘feel’ losses more than gains (about twice as much from key research) and are therefore short sighted, many times selling out on the earliest signs of market pullbacks, short changing themselves on the likely longer term gains of staying invested.
It all comes back to that great quote from Mr Buffett: "It’s time in the market rather than timing the market." If you can pick a financial adviser and fund managers you trust, don’t sweat the shorter term volatility, you may worry yourself out of the markets at the absolute wrong time.
Here at PS & Partners we often find the most basic of help is the most imortant, just having a friendly guide to let you know when to stick and when to twist, and if you do need to twist, then where to twist to!
If you liked this post You can follow us here on linkedin. More impoirtantly, if you like what we have to say and feel our expertise could help with managing your own portfolio, or help you to build a portfolio form scratch then reach out on:
nick.preston@partners-ps.com
+63 09177750730