Want to hear something unusual… and a little strange?
I really, truly, don't care how my portfolio performs today.
Or next week.
Or this year.
I mean, higher is better. Obviously.
But I don't care.
Why?
Well, two reasons. One is self-preservation, and the other has to do with my timeframe.
Let me explain.
I've been doing this investing thing for a while. In the past, I've loved soaring share prices. And I've been dismayed by falling share prices.
I've made and lost money. I've walked on clouds, and wanted to hide under the blankets.
But that's all distant history.
History, that – thankfully – I've learned from.
See, sometimes shares rise… and keep rising.
Sometimes they rise… then crash.
And yep, sometimes falls are temporary and sometimes they're permanent, too.
Thing is, in the short and medium term, there's no way to know which is going to be which.
Meaning?
Well, if I can't know whether or not the short- or medium-term movements are going to be sustained – or are going to go back the other way – why would I let my emotions carry me away?
Scoring the first try, or the first goal, in a game of footy is very welcome. Having the opposition score first can bring on a sense of foreboding. But any footy fan knows that celebrating (or commiserating) too early is just silly.
Why attach myself to that rollercoaster, for 6 hours a day, 5 days a week, on the ASX? As if it was some an endless see-sawing footy game where the score changes second-by-second and the lead changes – sometimes swinging wildly – over and over again?
I mean, if it was sport, maybe.
But my portfolio? My nest egg? Full of the money I hope to use to achieve my financial life goals? With all of the agony and ecstasy that would entail?
I know even asking the question is somewhat radical. For many, it's bloody hard, or impossible, to tear themselves away from the constant price quotes.
They have my deep and sincere sympathy. That's no way to spend your time – or to try to live your life.
Which takes me to my second reason: my timeframe.
I appeared on streaming business channel, Ausbiz, this morning. I was asked, quite reasonably, given how others often answer this question, what I'm doing as an investor given this week's Australian and US inflation data. Was I investing defensively? How had my approach changed?
My answer: it hasn't changed a jot. Because I'm not trying to guess what share prices might be in a week, a month or a year.
Why? Because it's not possible.
Instead, I'm looking for businesses that will be more valuable in 5 and 10 years' time.
I think it's very, very likely that if I find businesses that I think will thrive over that timeframe – and if I pay a decent price – I'll make money through higher prices (and possibly, though not always, regular dividends, too!) in the years to come.
Maybe, between now and then, the price will rise and keep rising.
Maybe it'll rise, then fall, then rise again.
Or fall, and keep falling, because I'm wrong about the company.
(You don't see many financial types put that in black and white, do you? But they should, and I do. Some of my companies will be disappointing, despite my hard work. That's why you need a well constructed and diversified portfolio.)
But overall, I think I'll do pretty well, if I get my approach roughly right.
So, why would I obsess over unpredictable short-term share price movements, instead?
How could that possibly improve my results? And wouldn't it be more likely to make my results worse, by distracting me and possibly leading me to make bad short-term decisions?
Last week sucked for my portfolio. That didn't change my approach, or any of the companies I owned.
This week looks like it'll be line-ball.
Next week? No idea. Next month? Ditto.
And, as I said, I couldn't care less.
(Frankly, I've come to kinda dislike sharp, sudden increases – they tend to be sentiment-fuelled, rather than based on fundamentals. And sentiment giveth, then tends to taketh away. Spare me the false positives!)
Companies and the overall market alike go through periods of optimism and pessimism. Boom and bust. And that's the good ones!
Trying to avoid it is pointless. But worse, it'll sap your emotional energy, your self-discipline and, in all likelihood, your portfolio.
Instead, ignore it. Tune it out. Focus on what you can control – finding great businesses, paying decent prices, and then letting time, and those companies, do the work.
And save your edge-of-the-seat couch action for your favourite footy team!
Fool on!
