Your Portfolio Performance Compared to What?
Ah, we restless humans. Sometimes, it pays to strive for greener grass. But as an investor, second-guessing a well-planned portfolio can leave you in the weeds. Trading in reaction to the latest hot stocks or in response to fear tricks you into buying high (chasing popular trends) and selling low (fleeing misfortunes), while potentially incurring unnecessary taxes and transaction costs along the way.
Still, what do you do if it feels as if your investments have been underperforming? It helps to lead with this key question, to decide if the impression is real or perceived:
How am I doing so far … compared to what?
Compared to the Stocks "du Jour?"
It’s easy to be dazzled by popular stocks or sectors that have been earning magnitudes more than you have and wonder whether you should get in on the action.
You might get lucky and buy in ahead of the peaks, ride the surges while they last, and manage to jump out before the fads fade. Unfortunately, even experts cannot foresee the countless coincidences that can squash a high-flying holding or send a different one soaring. To succeed at this gambit, you must correctly—and repeatedly—decide when to get in, and when to get out … in markets where unpredictable hot hands can run anywhere from days to years.
Remember too, if you simply invest some of your money in the global stock market and sit tight, you’ll probably already own today’s hot holdings. You’ll also automatically hold some of the next big winners, before they surge (effectively buying low).
Rather than comparing your investments to the latest sprinters, be the tortoise, not the hare. Get in, stay in, and focus on your own finish line. It’s the only one that matters.