Tuesday, 13 October 2015

Smoothing the Emotional Rollercoaster.

This past year has brought about a few changes to my investing strategy which I am hoping will dampen down some of the volatility of my investing journey.

This has involved selling some of my individual shares and replacing them with collective investments - notably Vanguard UK Equity Income fund and the more diversified Lifestrategy funds which formed the basis for my latest bookDIY Simple Investing’.

So far this year I have sold half of my portfolio - a dozen or so individual shares, which means 12 fewer annual reports, 24 fewer dividend receipts to monitor and less to write up for the blog - hence it has been a little quiet recently.

I have taken advantage of the lovely settled weather over the past couple of weeks to enjoy a return trip to Pembrokeshire and enjoy walking the coastal footpath - this time near to Strumble Head (just below Fishguard) - highly recommended!

Strumble Head Lighthouse
I am slowly trying to get away from my daily addiction of following the markets (it helps to overlook packing the laptop!) - easy when you are physically removed from it all in a remote cottage in Wales - less so in my familiar routine at other times!

I was reminded of the benefits of not checking on your portfolio every day when I re-read ‘Smarter Investing’ and also my article on some aspects of successful investing from July following the recent market turbulence. Nobel prize winning psychologist Daniel Kahneman found that a loss yields roughly twice the psychological effect of an equivalent-size gain ....mmmm.

The chances my portfolio of shares will be up on any particular day is around 50/50 - every other day therefore I am likely to get a double whammy - not good for my emotional equilibrium.

Interestingly, the longer the gap between reviewing my portfolio, the lower the chances of registering a loss.

Daily is ~48%
Weekly ~44%
Monthly ~40%
Annually ~30%
Every 10 years is ~20%

So, the intention will be for me to move from my daily fix to a weekly review and from there to establish a once-per-month regime. Lets see how it goes!

With less shares to monitor combined with a much less frequent viewing of my investments I will need to find a new hobby to fill all the extra time - maybe something more physical and then the coastal walks will be a little easier!

As ever, slow and steady steps…

6 comments:

  1. I like the idea of this. I've also started monitoring less and less, although I do still have several stocks I actively monitor... I'm eclectic!

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  2. Thanks for dropping in TV.

    I managed to catch your shares watchlist recently - looks like there is plenty of opportunities being offered by Mr Market with all the recent volatility. I hope you manage to bag some bargains!

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  3. Dear DIY Investor,

    I hardly monitor my porfolio at all. Really only to update spreadsheets after the latest annual accounts to keep a check on the companies performance.
    My requirement is to look for companies that may be able to increase their dividends by 5% per annum.

    If you were to take a company with a return of equity of 10% and a dividend payout ratio of 50% then that on paper gives me a 5% dividend increase regardless of what price I pay.

    Of course I do try to make sure I get reasonably value from companies that can sustain moderate growth, but it does take a lot of worry out of the equasion.

    Regards and continued success with your investing

    Louis

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  4. Louis,

    Sounds like you have reached the position I am aiming for so far as portfolio reviews are concerned.

    As always, thanks for stopping by and likewise, best wishes with your investing journey.

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  5. I check my pension quarterly to update the spreadsheet.

    I check my ISA several times a day. I just can't stop myself from looking and I don't know why. I don't think this has caused me to make any hasty, irrational trades, but it's way too frequent.

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    Replies
    1. Charlie,

      I suspect we are not alone! Good to know that it is not affecting your investing decisions which is the main reason for not viewing too often I guess.

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