Stupid to Look at Portfolio Too Often

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stuper1
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Stupid to Look at Portfolio Too Often

Post by stuper1 » Tue Nov 27, 2018 10:22 am

I'm reading "Fooled by Randomness" by Nassim Taleb. He gives a quantitative example of why it's foolish to look at your portfolio very often. Consider a super investor who averages 15% returns annually with a 10% standard deviation. Measured on a yearly basis, he has a 93% chance of a profit. However, on a quarterly, monthly, and daily basis, his chances are only 77%, 67%, and 54%. Combine this with the fact that a $1 loss is felt twice as hard as a $1 gain (some studies actually indicate maybe 2.5 times as hard).

So, if he looks at his portfolio once a year for 100 years, he will experience 93 points of pleasure and 14 points of pain.

If he looks once a quarter for 100 quarters, he will experience 77 points of pleasure and 46 points of pain.

If he looks once a month for 100 months, he will experience 67 points of pleasure and 66 points of pain.

If he looks once a day for 100 days, he will experience 54 points of pleasure and 92 points of pain.

The idea is that even though you are making a profit in the long-term, you are killing yourself with negative emotions over that same long term by looking at results too often, when most of the results you are looking at are just due to random noise in the market, not any long term trend.
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Re: Stupid to Look at Portfolio Too Often

Post by flyingpylon » Tue Nov 27, 2018 12:56 pm

Never mind the additional pain points for whining about it on the internet...
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Re: Stupid to Look at Portfolio Too Often

Post by buddtholomew » Tue Nov 27, 2018 1:27 pm

Just quoting the facts
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Re: Stupid to Look at Portfolio Too Often

Post by stuper1 » Tue Nov 27, 2018 1:31 pm

This was for a hypothetical super investor who gets average 15% returns with a 10% standard deviation.

I imagine the analysis for say a PP invester who gets average 7% returns with a 5% standard deviation (or whatever) would be pretty similar. In other words, a small majority of days are up over the long term, but if we look every day, we will get a lot more pain from the abundant minority of down days than we get pleasure from the small majority of up days.

I know this point has been discussed many times before in various ways, but I thought that Taleb's quantitative analysis was helpful.
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Re: Stupid to Look at Portfolio Too Often

Post by Cortopassi » Tue Nov 27, 2018 8:42 pm

That is great to read Stuper, and makes a lot of sense. The days when I'm too busy to look don't bother me anymore. Maybe I can get to once a week soon, then once a month and once a quarter. Pretty sure I can't get to once a year...!
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Re: Stupid to Look at Portfolio Too Often

Post by barrett » Wed Nov 28, 2018 8:14 am

Sure, constant portfolio checking doesn't make sense and it certainly doesn't help a person grow their money. But how does one really not know more or less how much money they have at any given time? For example, if I have a million bucks stashed away and I have 30% in stocks (because that's my AA) and stocks take a 10% hit, then I know I'm down $30,000 in that quadrant... and I have a pretty good idea that I'm down about that much overall unless I've heard or seen something about a rally in gold or bonds.

It's just really hard now to not get financial information. I go to the gym most days and there's always CNN with ""breaking news" about a stock "plunge" or whatever. Or you hear news of the Dow Industrials while driving in your car. Or your Chinese wife asks you what's up with the stock market because she's watching the news channel from Beijing and they're talking about weakness it the US markets.

Not caring is, I think, the only realistic goal. FWIW, I haven't looked at my portfolio since 11/15 when I had to reinvest some long bond dividends, but I still know more or less where I'm at. Just sayin'.
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Re: Stupid to Look at Portfolio Too Often

Post by Cortopassi » Wed Nov 28, 2018 8:55 am

barrett, you haven't looked for 3 years? How do you get notified if you need to rebalance?

That might be a way to go for me, since all this is in a Google sheet, if I can trigger an email if a certain cell goes above or below a value....hmmm....

I am close to not caring. Realizing I am able to pay for college for my kids without stressing finances was a really big one for me. That is the last big known lifetime spend. Oh, God, now I'm stressing out about getting old... :o
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Re: Stupid to Look at Portfolio Too Often

Post by buddtholomew » Wed Nov 28, 2018 10:34 am

Cortopassi wrote:
Wed Nov 28, 2018 8:55 am
barrett, you haven't looked for 3 years? How do you get notified if you need to rebalance?

That might be a way to go for me, since all this is in a Google sheet, if I can trigger an email if a certain cell goes above or below a value....hmmm....

I am close to not caring. Realizing I am able to pay for college for my kids without stressing finances was a really big one for me. That is the last big known lifetime spend. Oh, God, now I'm stressing out about getting old... :o
Maybe Barrett means November 15th
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Re: Stupid to Look at Portfolio Too Often

Post by dualstow » Wed Nov 28, 2018 11:05 am

I try to just look at dividends and interest coming in. Makes my hair grow.
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Re: Stupid to Look at Portfolio Too Often

Post by Cortopassi » Wed Nov 28, 2018 11:24 am

buddtholomew wrote:
Wed Nov 28, 2018 10:34 am
Cortopassi wrote:
Wed Nov 28, 2018 8:55 am
barrett, you haven't looked for 3 years? How do you get notified if you need to rebalance?

That might be a way to go for me, since all this is in a Google sheet, if I can trigger an email if a certain cell goes above or below a value....hmmm....

I am close to not caring. Realizing I am able to pay for college for my kids without stressing finances was a really big one for me. That is the last big known lifetime spend. Oh, God, now I'm stressing out about getting old... :o
Maybe Barrett means November 15th
Yeah, that's got to be it.
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Re: Stupid to Look at Portfolio Too Often

Post by barrett » Wed Nov 28, 2018 12:38 pm

Cortopassi wrote:
Wed Nov 28, 2018 11:24 am
buddtholomew wrote:
Wed Nov 28, 2018 10:34 am
Cortopassi wrote:
Wed Nov 28, 2018 8:55 am
barrett, you haven't looked for 3 years? How do you get notified if you need to rebalance?

That might be a way to go for me, since all this is in a Google sheet, if I can trigger an email if a certain cell goes above or below a value....hmmm....

I am close to not caring. Realizing I am able to pay for college for my kids without stressing finances was a really big one for me. That is the last big known lifetime spend. Oh, God, now I'm stressing out about getting old... :o
Maybe Barrett means November 15th
Yeah, that's got to be it.
Yeah, it's November 15th. But even that is an accomplishment for me. I check on this stuff way too often. It's become a habit and it's not a healthy one especially when one considers that the expected return of the PP is only 3% - 6% annual in real terms. Holding three volatile assets makes for a lot of hand wringing.

Now that I'm retired and paying myself a monthly check, I'm trying to cut back to checking once a month. A T-Bill comes due, I take my monthly draw and reinvest the rest in a new bill.

BUT, I'll also say it's almost impossible to be on this forum and not have a really good idea where asset prices are at any given moment. There's an overload of non-actionable information online. The plus for me has been that I've learned a ton both on here and also over at Bogleheads.
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Re: Stupid to Look at Portfolio Too Often

Post by barrett » Wed Nov 28, 2018 12:45 pm

Cortopassi wrote:
Wed Nov 28, 2018 8:55 am
Realizing I am able to pay for college for my kids without stressing finances was a really big one for me. That is the last big known lifetime spend. Oh, God, now I'm stressing out about getting old... :o
Congratulations on getting over the college stress hurdle, Cortopassi! We have three more undergrad semesters to pay for and I have to say that it's really nice when a financial plan actually works. While you're stressing about getting old, I will be stressing about whether or not our daughter will score a decent job 18 months from now. O0 (Afro Smiley for dualstow's amusement)
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Re: Stupid to Look at Portfolio Too Often

Post by jacksonM » Wed Nov 28, 2018 5:38 pm

It's nice to know there is math to confirm it but I seem to have figured this out instinctively already.

I thought HB said in his book to only look once a year unless you happen to notice something extraordinary going on in the economy. I was therefore surprised to see there were a lot of portfolio watchers not following his advice.

For those who do look often, what positive benefit can you actually point to for doing that?
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Re: Stupid to Look at Portfolio Too Often

Post by flyingpylon » Wed Nov 28, 2018 8:05 pm

I come to the forum for all the late-breaking Permanent Portfolio news. 8)

I check my own portfolio about 2 times per quarter, mostly just to update cash balances (contributions go to cash). When I made a commitment to my current allocation it was with the understanding that it had to be left alone in order to work as expected, and I seem to be fine with that.
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Re: Stupid to Look at Portfolio Too Often

Post by ochotona » Wed Nov 28, 2018 10:07 pm

Yes, I need to stop looking. I still look at the Momentum score every month, but the portfolio itself... not necessary to look at it.
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Re: Stupid to Look at Portfolio Too Often

Post by sophie » Thu Nov 29, 2018 5:22 am

I justify looking at the portfolio once a month in order to log into my accounts. I pick up messages and it keeps them active, and if the account were broken into I'd be more likely to detect it in time to do something about it.

I was thinking about going to once per quarter, but not less than that. And if I'm actually systematically logging into the accounts I might as well peek at the portfolio, right? However, I don't do anything to it unless a rebalance band is crossed...just look.
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Re: Stupid to Look at Portfolio Too Often

Post by Tyler » Thu Nov 29, 2018 10:31 am

After years of portfolio watching, I've come to the conclusion that the true problem isn't the act of looking but the reason you're looking. If you're looking because you're terrified of losing money or desperate to make money as fast as possible, it's an indication that you're looking to your portfolio to save you from something. Fix that something, and your investments will feel like a curiosity to keep an eye on rather than a daily struggle. Just not looking at all will definitely help kick you of the habit but won't fix the root cause of your financial insecurity and will leave you highly susceptible to regularly falling off the wagon.
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Re: Stupid to Look at Portfolio Too Often

Post by dualstow » Thu Nov 29, 2018 11:56 am

That's good advice, Tyler. I forgot to mention I also look at indy stocks, with my rationalization being I have to decide when to sell!

Thanks, Barrett. : - )
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Re: Stupid to Look at Portfolio Too Often

Post by buddtholomew » Thu Nov 29, 2018 12:55 pm

Tyler wrote:
Thu Nov 29, 2018 10:31 am
After years of portfolio watching, I've come to the conclusion that the true problem isn't the act of looking but the reason you're looking. If you're looking because you're terrified of losing money or desperate to make money as fast as possible, it's an indication that you're looking to your portfolio to save you from something. Fix that something, and your investments will feel like a curiosity to keep an eye on rather than a daily struggle. Just not looking at all will definitely help kick you of the habit but won't fix the root cause of your financial insecurity and will leave you highly susceptible to regularly falling off the wagon.
Now that I am aligned with prosperity I feel more comfortable; this was one of the factors that personally caused me so much grief these last years.
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Re: Stupid to Look at Portfolio Too Often

Post by jacksonM » Thu Nov 29, 2018 9:36 pm

buddtholomew wrote:
Thu Nov 29, 2018 12:55 pm
Tyler wrote:
Thu Nov 29, 2018 10:31 am
After years of portfolio watching, I've come to the conclusion that the true problem isn't the act of looking but the reason you're looking. If you're looking because you're terrified of losing money or desperate to make money as fast as possible, it's an indication that you're looking to your portfolio to save you from something. Fix that something, and your investments will feel like a curiosity to keep an eye on rather than a daily struggle. Just not looking at all will definitely help kick you of the habit but won't fix the root cause of your financial insecurity and will leave you highly susceptible to regularly falling off the wagon.
Now that I am aligned with prosperity I feel more comfortable; this was one of the factors that personally caused me so much grief these last years.
I probably learned to avoid looking at my portfolio because I got a late start in building it and I didn't want to be depressed to see how far off I was from being able to retire. My worse fear was that my career would come to an abrupt end before getting anywhere near what I thought I would need for a decent retirement. Since there was really nothing I could do about it except to live within my budget and invest all I could afford I figured the best thing I could do was just to plow forward and hope for the best.

I eventually did get laid off by my employer much to my surprise because I was still one of the most productive people in the company. I think it was probably the result of an email I sent one night when I was drunk and felt like expressing my opinion about something I shouldn't have.

Any way I got six months severance pay and when I checked my portfolio afterwards I was jubilant to find out that I had reached the figure I had in my mind as a retirement goal almost to the dollar. And I did that using the PP. Whether I could have done better with another portfolio or not is a question I really have no interest in. It did what I wanted it to.
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Re: Stupid to Look at Portfolio Too Often

Post by Cortopassi » Fri Nov 30, 2018 8:09 am

Email is a bad thing when emotions are high...
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Re: Stupid to Look at Portfolio Too Often

Post by barrett » Fri Nov 30, 2018 1:37 pm

jacksonM wrote:
Thu Nov 29, 2018 9:36 pm
buddtholomew wrote:
Thu Nov 29, 2018 12:55 pm
Tyler wrote:
Thu Nov 29, 2018 10:31 am
After years of portfolio watching, I've come to the conclusion that the true problem isn't the act of looking but the reason you're looking. If you're looking because you're terrified of losing money or desperate to make money as fast as possible, it's an indication that you're looking to your portfolio to save you from something. Fix that something, and your investments will feel like a curiosity to keep an eye on rather than a daily struggle. Just not looking at all will definitely help kick you of the habit but won't fix the root cause of your financial insecurity and will leave you highly susceptible to regularly falling off the wagon.
Now that I am aligned with prosperity I feel more comfortable; this was one of the factors that personally caused me so much grief these last years.
I probably learned to avoid looking at my portfolio because I got a late start in building it and I didn't want to be depressed to see how far off I was from being able to retire. My worse fear was that my career would come to an abrupt end before getting anywhere near what I thought I would need for a decent retirement. Since there was really nothing I could do about it except to live within my budget and invest all I could afford I figured the best thing I could do was just to plow forward and hope for the best.

I eventually did get laid off by my employer much to my surprise because I was still one of the most productive people in the company. I think it was probably the result of an email I sent one night when I was drunk and felt like expressing my opinion about something I shouldn't have.

Any way I got six months severance pay and when I checked my portfolio afterwards I was jubilant to find out that I had reached the figure I had in my mind as a retirement goal almost to the dollar. And I did that using the PP. Whether I could have done better with another portfolio or not is a question I really have no interest in. It did what I wanted it to.
Interesting story. When did you start investing in the PP?
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Re: Stupid to Look at Portfolio Too Often

Post by jacksonM » Fri Nov 30, 2018 2:00 pm

barrett wrote:
Fri Nov 30, 2018 1:37 pm
jacksonM wrote:
Thu Nov 29, 2018 9:36 pm
buddtholomew wrote:
Thu Nov 29, 2018 12:55 pm


Now that I am aligned with prosperity I feel more comfortable; this was one of the factors that personally caused me so much grief these last years.
I probably learned to avoid looking at my portfolio because I got a late start in building it and I didn't want to be depressed to see how far off I was from being able to retire. My worse fear was that my career would come to an abrupt end before getting anywhere near what I thought I would need for a decent retirement. Since there was really nothing I could do about it except to live within my budget and invest all I could afford I figured the best thing I could do was just to plow forward and hope for the best.

I eventually did get laid off by my employer much to my surprise because I was still one of the most productive people in the company. I think it was probably the result of an email I sent one night when I was drunk and felt like expressing my opinion about something I shouldn't have.

Any way I got six months severance pay and when I checked my portfolio afterwards I was jubilant to find out that I had reached the figure I had in my mind as a retirement goal almost to the dollar. And I did that using the PP. Whether I could have done better with another portfolio or not is a question I really have no interest in. It did what I wanted it to.
Interesting story. When did you start investing in the PP?
About 10 years ago.
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Re: Stupid to Look at Portfolio Too Often

Post by Tortoise » Fri Nov 30, 2018 5:28 pm

Cortopassi wrote:
Fri Nov 30, 2018 8:09 am
Email is a bad thing when emotions are high...
At least 80% of my communication with coworkers is via e-mail (I get literally hundreds of work e-mails every day, at least a few dozen of which I have to read and respond to).

And my emotions at work are frequently running high due to perpetual frustration with my coworkers' lack of communication and articulation skills.

Recipe for disaster? LOL!
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Re: Stupid to Look at Portfolio Too Often

Post by jhogue » Sun Dec 02, 2018 11:00 am

I check my portfolio almost every day. I find it mildly entertaining rather than stressful.

As for positive benefits of looking daily, seeing how the components bounce around in random, un-correlated fashion has convinced me that the HBPP dampens overall volatility and gives me a much smoother ride than the stock-heavy portfolio I previously had.
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A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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