It almost never fails. In the middle of a weekday golf game, someone will ask if the market is up or down that day. Or, perhaps during my morning walk with the dog, someone will ask me what I think the market will do that day.
Since the market experiences more up days than down over time, as evidenced by the long-term upward trend for stock prices, I suppose the best guess to make would be to predict an up day, but it would be just that -- a guess. To the golf buddy, I generally ask why they care. They should be concentrating on their golf swing and not distracted by the daily comings and goings of up and down days for the financial markets.
Since the 1990s, inception of continuous financial markets coverage on television and the easy access the Internet offers to view our investments in real time, there has been a trend toward distraction with the daily noise of the markets. This has manifested itself in the shortening of holding periods and a mentality of trading more than investing. The problem is that most of us do not have the temperament to succeed as traders, and we play into the hands of the real pros when trying to play their game.
An “investor” who has a time horizon of a few years or longer puts the odds of success on their side. Having to make fewer decisions means the likelihood of making fewer mistakes and a calmer approach should lead to clearer thinking when the markets hit their inevitable rough patches.
This doesn’t mean you have to buy life-long investments with every decision. It means that you’re not concerned about the next three days, instead expecting to make money over the next three years.
The harried demeanor of the talking heads on CNBC predicting the current correction turning into the next Armageddon, followed by the next one predicting Dow 30,000 is just around the corner does not foster a healthy environment for personal investment decisions. But it does draw viewers and sell commercial time.
Have you noticed there is always a clock on the screen counting down to something? Perhaps it’s the opening of the market, or the closing, or the next economic report being released. I believe this creates a sense that investors should always be doing something in their portfolio, but the best investors are generally those who are the least active.
My personal time watching financial markets coverage on television probably totals only one hour a year. I suggest catching up on your portfolio a couple times a week and keeping an eye on the financial news here in the Herald and on a few select mainstream financial sites that aren’t prompting you to trade all the time. I like to use www.finance.yaoo.com and www.money.cnn.com.
Remember, what’s being talked about on financial television is what sells the most commercial time, not the best thing for your portfolio.
Tom Breiter, president of Breiter Capital Management Inc., a registered investment adviser, can be reached at (941) 778-1900 or by email at email@example.com.