How often do you look at your portfolio? We have some clients who look at it everyday and others that only check it quarterly. Volatile markets tend to make people a little more nervous about how their investments are performing, and we believe it causes them to look at their investments more often.
As Investment Advisors, it’s our job to teach our clients that they don’t need to look at it every day. It will drive you crazy to see your nest egg fluctuate as much as we have seen the market move recently. The nice thing about stocks and bonds is that you know exactly what they are worth at any given time. We all have a tendency toward wanting to know how we are doing with our investments, but it shouldn’t be daily. How often do you check the price of your home or your rental properties? We are willing to bet not that often. For many, the home is the largest investment owned, but we don’t check or even know what it’s worth daily. We have no way of knowing what it’s worth until someone makes an offer to buy it at certain price. Does the drop in your home value cause you to panic or lose sleep? It shouldn’t, and neither should market fluctuation for your portfolio. If it does, then you have too much risk on and you need to have a portfolio built with less volatility. Just remember, there is a trade off with risk and return with investing.
Many of our clients come in for meetings and want to know how their portfolio is performing in comparison to the S&P 500. The S&P 500 is the major market index that is used in comparing performance vs equity portfolios. If your portfolio is not 100 percent equities or stocks, then comparing your portfolio returns to the S&P 500 is not a fair comparison. A portfolio that has a 70 percent stock to 30 percent fixed income weighting is not going to outperform the S&P 500 in a bull market. It will tend to outperform in down markets and will have less volatility due to the diversification of asset classes. For many retirees, this is the proper allocation given the current interest rate environment.
The fact is that as humans we tend to feel twice the pain as we see our portfolios decline in value then when we see it appreciate. Investing should not be considered a short-term proposition. We need to look at our investments over the long-term and not make rash decisions based on daily market fluctuations. Everyone has a different situation and we treat each of our clients based on their goals, objectives, and risk tolerance. Portfolios can be tailored to meet each client’s needs. There is no one size fits all when it comes to investing. We encourage you to call us for a free portfolio review. We have both Certified Financial Planners™ and a Chartered Financial Analyst on staff to assist you in making the correct investment decisions.