It is tempting to keep checking your view holdings every day. I bet some investors are checking it a few times every day even though prices only get updated once a day. However, please don’t fall into the trap of focusing too much on the daily fluctuations once you start to do that.
The temptation is definitely there. Goodness knows, I am also happy to see my total holdings keep on increasing in value every other day. But it bears repeating that markets do not keep on going up in one straight line. There will definitely come a day or three when markets are in profit taking mode and you will see your holdings come down.
If you were following them up voraciously and living up every increase each day, when you come to days when there are profit taking, you will suffer an emotional let down just as the current bull run is feeding your emotions into a high.
Luckily unit trust prices get updated only once a day. The stock traders are currently having heart attacks as the market whipsaws dramatically even during the day. Wednesday, the 29th was a great example of this. China markets took a tumble as investors were concerned that the banks were going to pull back on lending as they were approaching their lending targets. The China market was down 7% at one point, and the STI index was down over 50 points at one point at midday.
The people that sprang out to scream “sell!” or “the crash is here!” were many. Many took profit, or even if not making money, exited the market. By the end of the day though, the market had calmed down and the STI index was down only 20 points for the day. People who were following the market so closely, including the day traders would have gone through an exhausting rollercoaster ride that day.
This extends to day to day fluctuations as well. We are currently in the midst of a strong bull market, so emotions will run high. It is extremely gratifying to see your holdings keep on charging up. Just remember again not to get too caught up in the moment. I am keeping my eyes firmly on a two to three year horizon, and not how the STI performs today. This is why we call for the STI index to hit 3600 by end 2011, but you will not hear us say where it will be at the end of this year.
Most analysts get short term market forecasts wrong anyway. They are always too conservative at the bottom and too aggressive at the top. Four months ago, when the STI index was scarping the bottom at 1455, I bet few if any analysts would have dared to come out and say that within 4 months, it would rise over 1100 points to close above 2500 points. Such an analyst would have been laughed at and ridiculed. But such is the way that market moves.
But back again to my point, so while the current bull market is extremely satisfying, please don’t let your emotions get away from you. One way is to try not to look at your holdings too closely every day. (I said try, it won’t be easy right now I know!). If you were already well positioned, as I have been talking about doing for months, and which I showed over my 2 months worth of blog entries, then there isn’t be massive changes to your portfolio now.
So, take a deep breath, don’t let the high get away from you. Keep cool and remember that our overall objective is to see the market much higher, but that’s over a two to three year horizon and not one week. We will get to STI 3600, I even think we will eventually pass it, but it won’t happen next week, and we aren’t going to reach there without corrections, sell downs and the market zig zagging along the way. Best analogy is for those of you that have shot at something before (with an M16 for those of us who have been through the army, with an air rifle or a toy gun for the rest).
Its “keep your eyes on the target!”
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