siamond wrote: ↑
Sun Feb 25, 2018 5:33 pm
I was browsing through this excellent blog article from a self-described "couple of engineers with a passion for investing
The Basics of Behavioral Finance: Tips and Tricks to Combat Your Cave Man Brain
And one point made me strongly react. FINALLY somebody who articulated what I've been practicing and preaching for a while. I can't agree more. DO PEEK!
Unique Advice – Check Your Accounts at Least Weekly, Ideally Daily
This is financial blasphemy to many. The current thinking in the world is that since you have these behavioral weaknesses you should compensate for them by avoiding your finances. The thinking is that you will do something stupid if you look at them. I don’t disagree…..assuming that you look at them infrequently and if you only look at them when the financial world seems to be falling apart. This is exactly what happens. People are going through their lives: family, work, friends, vacations etc. They don’t really pay much attention to Wall Street or their investments. Then all of a sudden there is a major market correction or crash and everyone is talking about “the market”. So what do they do, they decide to see how their 401(k) is doing and they are SHOCKED at how much it has lost, they panic, they sell.
I propose a different approach. If you are armed with knowledge and logic, daily swings in the market will not phase you. More importantly, I believe that growing accustomed to the daily swings in the market will harden you for more robust corrections in the future.
This has been our policy/philosophy from the start, as I've mentioned previously a few times.
"Looking" (I don't consider it "peeking", which suggests something is perhaps a bit wrong) almost daily started out so I could "learn" how things were "doing". I didn't even know enough then to articulate that this meant "learning how our balances were doing in response to market conditions or events", but that's what it was, of course.
Over time, that easily became, "Oh, yeah, we're down [or up] because of [market condition/event], and it will recover..." - and that goes for *both* the nice new highs as well as the recent lows.
But of course, the "highs" kept coming more often, although those also reflected additional contributions.
At first, I even graphed every holding. (Yup, every holding. But I'm a numbers geek, and like graphs, period.)
I don't do that anymore, and haven't for a long time, but it definitely helped me see and feel "how things were going".
Even at our recent new (and surprisingly good) "highs", I kept reminding DH that "remember, we could lose $X, but don't worry...", etc.
That is when we removed a significant chunk about 1-2 months ago, which also coincided with his declaring an outside window in terms of timing to his very belated retirement. Point is, it was time to collect some cash.
We had been quite aggressive until rather recently.
But LOOKING was always very important.
I can't imagine "not knowing" OR "being blindsided" by an occasional glance that happened to be at a temporary "down" that thus appeared really dramatic OR wondering "how we are doing" during various market gymnastics.
This signature is a placebo. You are in the control group.