So today I have two stocks in the portfolio getting hit very hard. As a result the portfolio has a noticeable lag on the day.
This is a great time to talk about managing sentiment. Days like this are guaranteed to come along every now and then, this is just how the market works. Period.
Any long term portfolio is guaranteed to have days with a lag; months, quarters and years with a lag for that matter too.
Part of managing a portfolio is to simply own the fact that this is how it works, that occasionally it goes the other way as well and that good and bad periods balance themselves out.
The only thing I feel about this is the hope that no clients stress out too much. Trying to calm someone down when they are upset about a bad day is not easy to do. All I can do is try to convey the extent to which one day means nothing.
To repeat this is simply how the stock market works.
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6 comments:
Days such as yesterday are scary but useful, a stress-test of correlation: Elements going south are always easier to deal with when other elements are going north; some positions got whacked, others hung in there, and others (home builder and mortgage lender shorts in particular) performed splendidly.
what 2 investments were down in your portfolio?
I don't think the names really matter. That's not really the point.
Thanks for you candor, Roger. It is one of the reasons I enjoy your blog so much. So many investment pros never make any mistakes (wink,wink). I got stopped out of TEX today after a big drop two days in a row, and then it came back up 4% right at the end of the day. That is the cost of having a sell discipline I guess.
Do you have any thoughts about FXE and/or
FXB as defensive holdings at this point in time?
Thanks, Scoot.
Thanks, I needed that encouragement. I had been remembering an earlier comment of yours that after beating the market for a few days, it was not unusual to lag for a few days. My really good performers this year like CAT and CCJ have been taking their lumps this week.
So, a new question based on Scoot's question. What is the feeling on stops? I have been stopped out a couple of times when that turned out to be a "wrong" move. That can also force taxes, I don't really want to incur right then. On the other hand, it is enforced discipline. Then, of course, there is the question of what % level of stops and the issue of trailing stops.
Rick
Boys, I think this is just the beginning of the volatility train. Hang on.
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