Posted April 26, 2016
Marc Rittersporn /marc@integritt.com
Did you know if you committed a crime you could hide it on google? That’s right, put it on page two of a Google search, chances are no- one will ever see it. At least 90 percent of the time, no-one looks there. As a matter of fact, most people never click beyond the first two links on Google.
The purpose of the above illustration, is that what others choose winds up being what we see and believe to be worthy information. Behavioral finance has described any number of ways we give too much weight to just these sorts of hits that popular custodians feed us. The results tempt us into believing that leading financial news –, global oil prices, interest rates, foreign economic disasters and so on – should be the driving force behind our next market moves.
Times are good now so we’re not getting as caught up in news, but let me remind you If it’s headline news, it’s already been incorporated into market pricing. Even if we could predict the outcomes (we can’t) it’s too late to act on them – so you shouldn’t. Rather take a look at what the professionals, not filling reporting space, are saying.
- An Associated Press writer shared this comment: “A wild move in the market one week ‘is not like seeing a unicorn,’ [Vanguard principal Fran] Kinniry said. ‘Stocks are volatile. But you’re not investing for one day or one week, you’re investing for 10 or 20 years.’”
- Seeing how often investors abandon their plans during financial crises, David Andrew of Australian-based Capital Partners commented, “Short of tearing up twenty dollar bills and throwing them away, I can’t think of a more destructive wealth management strategy.”
- Forbes’ “Tax Girl” Kelly Phillips Erb reminds us that a market drop need not represent a personal loss: “Even if you were to sell your stock today, just because it was worth less this morning than when you went to bed last night doesn’t necessarily mean you’ll have a realized loss.”
- In a June 2015 column, Morningstar’s Christine Benz comments, “When it comes to checking up on your portfolio, a policy of benign neglect invariably beats too much monitoring. Investors who pay attention to their portfolios’ daily values may find themselves berating themselves during the market’s periodic downdrafts or congratulating themselves too much when their balances are fat. … Taking a long view is usually more helpful.”
This advice makes good sense and it did when the market was volatile. Times are good now but when the market is ready to it will get volatile again. The statements make good sense today. The evidence is strong that they will continue to make good sense tomorrow, regardless of what is breaking on the Internet.
As always, if we can answer any additional questions about your own portfolio or the latest financial news, please be in touch.