Our Practical Investor Gets Performance Anxiety
I now find myself tempted to check my returns against my benchmark several times a day.
A mild form of insanity grips you when you start publishing your investment returns regularly. Of course, I’ve known this for years. I even mentioned the phenomenon in my book Investing 101 to explain why individuals could invest better than the pros. You're simply better able to make reasonable decisions in private than when you’re telegraphing every move to the world -- and thus opening yourself up to public criticism.
SEE ALSO: Be a Better Stock Investor
And yet, as I continue with this experiment of investing in public, I'm reminded of those people who talk about out-of-body experiences when they came close to dying after their hearts stopped temporarily. I'm watching myself from a distance, understanding what's happening but seemingly powerless to stop the creeping mania.
![https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-200-80.png](https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-320-80.png)
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Growing obsession. The descent into madness started almost imperceptibly. After launching this column, I began to check my accounts just a touch more often than before. Pretty soon, it was the first thing I did every morning. Then I began to wait anxiously to update my returns at the market's close. I now find myself tempted to check my results against my benchmark several times a day. Worse, instead of looking at whether I'm making money, I now focus on whether I'm beating my index. Winning the competition suddenly feels more important than the spoils.
Of course, I'm not really mad. The key to keeping grounded lies in understanding a simple truth: The biggest threat to long-term wealth is impulsive, short-term decision-making. When tempted to make a move that's based on other people's impressions rather than my own judgment, I force myself to sit on my hands and do nothing at all.
I share these musings because they are worth considering if you invest in actively managed mutual funds or allow a broker to make investment decisions for you. Even smart and experienced professionals make moves that can harm long-term results so they can improve their short-term competitive position.
Consider "window dressing." Near the end of a year or quarter -- right before the books are frozen on what will be reported to shareholders -- some fund managers sell their losers and buy big winners to "dress up" the portfolio that shareholders will see. Clients may think, Brilliant -- he's got Apple! But a window-dressing purchase is more likely to harm long-term returns than help them. That's because the stock was bought after it had run up, and the losers were sold after they'd hit their nadir. Many investors will never know why the sum of the fund's performance never seems to live up to its parts. To be sure, the performance is public and investors may eventually catch on. But at least for a while, the window dresser can claim (unearned) bragging rights.
Back to my portfolio: I still haven't sold any stocks. I glared menacingly at a few that were making me look bad (that means you, Corning, Johnson & Johnson and PPL). But I expect those stocks, like smart-alecky teenagers, to grow out of a bad stretch. Meanwhile, I will watch the firms closely.
I also took another look at the stocks we recommended in January (6 Stocks for the Year Ahead) and picked up the two that have done the worst -- Schnitzer Steel (symbol SCHN) and Target (TGT), at $45.56 and $52.14, respectively. Both posted disappointing numbers -- Schnitzer's earnings for the September–November quarter came in below expectations, and Target's December sales were lackluster. But I'm attracted to them not only because I think the stocks will do well over the next few years but because they help diversify my portfolio, which had been heavy on recession-resistant companies. Schnitzer and Target, by contrast, would benefit from a stronger economy.
Meanwhile, the stocks I bought in December -- particularly Apple and Microsoft -- are on a roll. It's a great time to be an investor.
Kathy Kristof is a contributing editor to Kiplinger's Personal Finance and author of the book Investing 101. You can see her portfolio at kiplinger.com/links/practicalportfolio.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
-
Visa Is the Worst Dow Stock Wednesday. Here's Why
Visa stock is down sharply Wednesday after the credit card company came up short of revenue expectations for its fiscal Q3.
By Joey Solitro Published
-
Another Analyst Moves to the Sidelines on Tesla Stock After Earnings
Tesla stock is spiraling Wednesday after the EV maker's big earnings miss and Wall Street has been quick to weigh in. Here's what you need to know.
By Joey Solitro Published
-
Stock Market Today: Stocks Tumble on Disappointing Big Tech Earnings
Poorly received quarterly results from Alphabet and Tesla sparked a steep selloff in equities.
By Dan Burrows Last updated
-
Stock Market Today: Mega-Cap Tech Rallies to Drag Markets Higher
Markets focused on upcoming earnings from Magnificent 7 stocks rather than chaos in D.C.
By Dan Burrows Published
-
Stock Market Today: Stocks Tumble After Spectacular Global Internet Crash
Market participants rushed out of risk assets to end a wild week of trading.
By Dan Burrows Published
-
Stock Market Today: Dow Sinks 533 Points as Big Banks, Mega Caps Slump
Goldman Sachs and Apple were two of the worst-performing blue chip stocks on Thursday.
By Karee Venema Published
-
Stock Market Today: Semis Get Slammed and Blue Chips Bounce
The potential for more curbs on tech sales to China set off a rotation into blue chips.
By Dan Burrows Published
-
Stock Market Today: Dow Spikes 742 Points After UnitedHealth Earnings
The S&P 500 and Nasdaq also scored wins Tuesday albeit with much smaller gains than the blue chip Dow.
By Karee Venema Published
-
Stock Market Today: Dow Adds 210 Points as Apple, Goldman Hit New Highs
A big rally in blue chips and some dovish Fed speak boosted the equities market Monday.
By Karee Venema Published
-
Stock Market Today: Markets Bounce Back on Rate-Cut Optimism
The latest readings on consumer sentiment and inflation helped lift the odds of the Fed easing in September.
By Dan Burrows Published