Editor’s Note: This week, with Steve on vacation, we’re revisiting a popular Two-Minute segment that generated dozens of comments from subscribers. Find out what Steve revealed that had viewers saying “It sounds like you were talking about me!” and “This is great advice.”
Most folks aren’t able to accept it. When it comes to managing a successful portfolio, you are almost always the biggest problem. But what are most people doing that’s costing them so much money?
Over the next two minutes, Steve McDonald reveals the answer and the solution.
Script:
A very simple message this week and of course, as with all simple ideas, it will be almost impossible for most folks to accept.
I probably should have wrapped it in a very complex formula or confusing charts. More of you probably would buy into it.
But here it is.
The less often you check your long-term investments, the more money you will make long term. Yes, it has been documented time and time again. Google it!
Jack Bogle, the founder of The Vanguard Group, one of the best long-term investors ever, says… never peek, especially during a down market. It will cost you money.
He means peek at your portfolio.
And, for retired persons, long term is the only way you can invest. Our gambling days are over!
Why ignore your account values- especially in a down period? Because worrying about it and fixing what isn’t broken is the best way to pile up losses, not gains.
We are crossing psychological barriers in this market all the time and that means everyone is looking for a reason to panic. Sounds stupid, I know. But that is the reality of a market like ours.
And panic costs money. Money that most of us have no way to replace it.
Let the market be a market!
What happens too often is the day-to-day noise from the 24/7 business news cycle drowns out our common sense and the wisdom our 50, 60, 70, 80 years have taught us. We lose sight of why we put our money where we did and what we expected from it when we did.
All the evidence supports the idea that jumping in and out of the market will do nothing but lose money, especially after a few bad days, which we will always have. Or even during an extended down period. Think 2007 through early 2009 and look where we are today.
Just so I can avoid a few emails asking what is long term; long term is three to five years minimum… 10 is even better.
The unfortunate part of this simple idea of no peeking is that it is all but impossible for most people. The urge to cut-and-run is too great.
But here’s a way you can begin to retrain yourself… getting an appreciation for the market’s history of volatility.
Go back over the market averages for a six-month period before and after a big collapse… 1987, 1990, 1994, 2000, 2007, 2008.
See how the market jumped up and down day to day and by what percentage before it crossed barriers like 1,000, 5,000, 10,000 and 14,100 on the Dow.
Then look at how long it took to recover and how it came back. How big were the percentages on comeback days?
This is a good starting point to gain an understanding of how long-term thinking and ignoring day-to-day volatility – that’s what the no-peek rule is really about – work to your advantage.
Get a long-term market perspective or get ready for some very big losses.
No peeking! It works and the numbers prove it.