"I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years."
-- Warren Buffett
Most investors have heard or seen this quote from the great Warren Buffett, but very few actually listen and heed his advice. The availability of daily stock prices has drastically changed with the introduction of the Internet. What once was available mainly via newspapers has now become an inescapable and always-present reminder of one's flucuating portfolio.
Investors check stock quotes on everything from their online brokerages account to their jam-packed Twitter feeds. We've reached a point where one almost has to go out of his or her way not to see how their favorite stock or the S&P 500 performed on a certain day.
To truly highlight the insignificance that daily fluctuations have on a long-term holding, let's take a look at the four largest U.S. banks, all of which handily outperformed the broader market in 2012:
1. Bank of America (NYSE: BAC)
Bank of America's shares soared a blistering 100% in 2012. Yes, 100%. With that kind of return, the stock must have been up almost every day, right? Wrong. Here's how Bank of America shares end each trading day in 2012:
2. Citigroup (NYSE: C)
Citigroup's stock price rose almost 40% in 2012, but those who checked the stock price every day and nothing else probably would have thought the stock went essentially nowhere. Here's the daily breakdown:
3. JPMorgan Chase (NYSE: JPM)
If an investor only read the headlines about JPMorgan in 2012 and checked the daily stock price, he or she probably would have a very skewed view of the stock's performance. The stock returned nearly 26%, almost doubling the return of the S&P 500, despite an embarrassing and highly publicized trading loss in its CIO division. After each closing bell, the stock ended like this:
4. Wells Fargo (NYSE: WFC)
Different bank, same story. Shares of Wells Fargo also crushed the market and returned more than 20%. You can probably guess how the shares ended each trading session:
You may be thinking -- "Well, that's interesting, but those are just examples of stocks that had great years, I bet underperforming stocks look bad most days." Well, no. One of the most hated and dreadful stocks to own in 2012 was J.C. Penney (JCP +0.00%).
The stock lost almost 44% of its value. However, J.C. Penney shares still traded higher on 44% of trading days! That's only a difference of 13 days when compared to the days B of A traded higher, and that stock doubled! Here's how J.C. Penney's full year played out:
Eye-catching headlines and daily gyrations are fun to follow, but that's about it. If you aim to be a successful, long-term investor, but can't stop yourself from constantly checking your portfolio's minute-by-minute changes, you're probably wasting your time and making yourself sick.
Stock prices sourced from Google Finance
