Wednesday, August 4, 1999
The Anti-Aging Fribble
Can your portfolio reveal your age?
While checking my portfolio recently, I caught myself frowning. I try to avoid this common facial habit in an attempt to postpone that inevitable groove between the eyebrows. During this episode of frowning my portfolio was branded with the sad red smiley (i.e., my stocks were down) for the fifth straight day. As I restored my face to a more neutral expression, I realized it was short-term thinking putting a wrinkle on my brow.
I was frowning because I wanted to see positive results in my holdings today -- right now. "Why are these great companies down 20%? Haven't I made good investments?" I scowled. I was having doubts. My portfolio had been green (i.e., my stocks were up) for so long that I had forgotten the market doesn't move up in a straight line. Unlike a savings account with predictable interest payments, who can guess where stocks will be next week or next year?
Oh, I know lots of folks try to predict the market. Some have managed to make a career out of market forecasting. I suspect these advisors make more money by selling their predictions than from their investment returns. I'd venture a guess that day traders and technical analysts who dance to the beat of the short-term have the wrinkles to show for it. Even the most staid blue chip company can take you for a wild ride.
I took a deep breath and reminded myself that long-term investing means expecting market swings. "This is just the market moving to its own rhythms," I said to myself, "nothing to make wrinkles about." The Motley Fool often advocates investing in stocks that won't keep you up at night. I'd like to add my new investment criteria: Don't invest in stocks that make you frown during the day. On one hand, frowning at your portfolio might indicate that you've invested in stocks too volatile for your comfort. On the other hand, frowning could be a gentle reminder that you've temporarily lost your long-term focus and need to get back on track.
Who knows, maybe in 20 years FDA research will reveal that, on average, Foolish complexions have better elasticity, fewer wrinkles, and more smile lines than both Wise investors and a control group of non-investors. So, if you're interested in keeping your skin looking its best, I'd recommend using sunscreen, drinking eight glasses of water daily, and not frowning at your portfolio. You'll save money not buying the latest Alpha Zeta Renewa Creme and the next time someone says, "Your skin looks great, what's your secret?" you can say, "Thanks, it's my portfolio."
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