Time (Frame) Management

Barry Ritholtz had a great post yesterday defining various time frames and what the people who use those time frames should care about and should not. I don't think there was any judgement on his part about the validity of the time frames so much as knowing which is right for you and then sticking to it. 

This is something we talk about a lot here. To the extent most market participants don't want to make a full time job out of managing their portfolios it would seem longer time frames would be suitable. I also think that most people's real objective where investing is concerned is simply having enough money for when they need it which is another reason for taking a longer term view.

For people who use individual stocks, taking a long term view does not mean don't pay attention. Barry talks about long termers not including an analyst downgrade as a reason as a reason to sell and while I agree with him on that, fundamental stories do change and the only way to know they are changing is by keep track at some regular interval such that you can be informed in a reasonable time.

I think of that as looking for news everyday, long term holding does mean be able to properly interpret price moves to decide if they are meaningless not necessarily be uninformed about them. Why was some stock you own down 4% last week? Was the entire niche down 3% due to some top down factor? If so then a 4% decline would seem to be meaningless.

As someone who does make a full time job out of managing a portfolio I prefer to see the various price moves happen because I feel that is the easiest way to know if it is in fact meaningless. To be clear there is no implication of infallibility, an actively managed portfolio is a series of decisions and not all of them can be correct but as we've discussed many times success does not hinder on be correct 100% of the time.