Wednesday, August 15, 2012

Managing the Emotional Side of Portfolio Watching

Checking on your portfolio every day can be agonizing. One day you’re up $1000 and the next you’re down $1000. Toss in the fact that experts estimate that we feel losses twice as intensely as we feel gains, and an oscillating portfolio can leave you depressed even if the daily gains tend to be a little bigger than the losses. I’ve found that a minor change to the way I view my portfolio makes a big difference to me.

I used to store my portfolio information on one of the free online services. It produced numerous statistics including the daily gain or loss in both dollar terms and percentage terms. In the last couple of years I’ve been using my own spreadsheet that does some extra calculations like telling me when it’s time to rebalance. Crucially, though, my spreadsheet does not report daily gains or losses. I only work out gains and losses roughly once per year.

To know whether I made or lost money during a given day or week, I’d have to remember a past portfolio value. My imperfect memory doesn’t allow me to do this with any reasonable accuracy. So, I no longer agonize over short-term gains and losses. I just check to see if rebalancing is necessary (which is rare) and occasionally adjust the portfolio for new money I’ve added.

I find this an interesting case where I’m happier and more likely to make good investing decisions because I have less information.


  1. I'm crushed this week. Not only did our monthly addition last week get hit with higher prices, but it seems like they are still drifting up! I was hoping to at least get through the rest of the year taking advantage of opportunities to buy at relatively low prices, but I fear that rising confidence may ruin our plans. It's hard to watch!

  2. @Simply Rich Life: I felt the same way when a snafu caused a delay in my RRSP contribution and stock prices were rising while I waited for things to get straightened out. I figure the delay cost me about $800. However, I suppose that prices sould just as easily have dropped and the delay would have saved me money.

  3. Fortunately it was just a small loss for you (and for us some months let us get in at lower prices). I have a deep fear that stock markets around the world will continue to rise in the next 10 years. If only enough things would go wrong in that time, we could really get some good assets in our portfolio.