What To Make Of It

Usually on Wednesdays I go to Phoenix and work at Your Source's office (as a side note I am the portfolio manager for a financial planning firm. I go to the office two or three days a week and work at home in Prescott the rest of the time). I woke up Wednesday with a bad headache so I stayed home and worked from there. This morning one of the planners was asking me how I felt and asked if it was stress related due to the market.

I was shocked by the question for a couple of reasons. So it got me curious how many people actually stress out. I can understand active traders being stressed. That is a high mental energy task. It requires tremendous skill and luck and when one of the two go against you; ouch.

I don't think I have the mental make up to make relatively large, short term trades that rely on a particular outcome. I think of the market as a great place to get rich slowly. When I build a portfolio for clients, no individual name makes up more than 3% of the account. That way if I am wrong about a stock it doesn't really hurt my clients financial well being.

As quarters come and go there will be times where I outperform the index and times where I lag, that's just how it is. To stress out about it seems counter productive. The thing I am trying to do is get most of the big picture themes correct, luckily I have been able to do so. In a properly diversified portfolio you should always have some stuff that is up and some that is down. If everything goes in the same direction all the time, how diversified are you?

Perhaps the question about stress came from his own way of dealing with the ups and downs of the market, who knows? But to answer the question directly, I never get stressed out by what the market is doing. I think my personality type is such that I am able to take a long term look at things. Stocks have an up year 72% of the time. To paraphrase Peter Lynch, I don't know whether the next 100 S+P points are up or down, but I know where the next 1000 points are.