Living in Belgium means that the news papers and websites bombard me with a lot of news and messages on the BEL20, the index representing the Belgium Euronext stock market out of Brussels. The last few days the graph on the newspaper that I read online was trending negative and then the day after there was news item: Bel20 ends negative series. How relevant is this info to me?
Each time if I go to my favorite news site, there is this small indicator of what the BEL20 is doing today. When I go the economical section, then I get to see a graph with the last 3 months performance of the BEL20. And the last 3 months, this has been a nice rollercoaster with ups and downs.
The issue with this graph is that it shows a hefty roller coaster, but I feel it is taken out of the context. It is only on 3 months, and the graph does mean nothing without looking at the percentages. On this specific graph, it is 3 to -3, I have seen graphs where it is +10 to -2, clearly a big difference. The mental impact is that you see things going up and down, from the top of the graph area to the bottom of the area.
Why is seeing this graph on a daily basis not good?
My investment scope is bigger than the BEL20
Being an index investor, I do not limit my investments to the so called home market. So, seeing each day the evolution of the BEL is actually not representative for my portfolio. In my asset allocation, Belgium is probably less than 1,5 pct (guesstimated)
A number that would interest me more to see on the website, would be the evolution of a world index. My asset allocation tries to mimic that.
But seeing this number multiple times per day, would that be a good idea?
Looking each day is not the goal
Investing is for the long term, at least, that is how I try to look at it. I do not engage in day trading, market timing or quick profit schemes. So, there is really no need to look every day.
There has been a lot of research on this: There is evidence that people who look every day, or even multiple times per day at their portfolio, tend to trade more often. But not for the better, for the worse. If you see that the market is going up or down, you might be tempted to react to this temporary momentum by trading and getting in and out of the market. There are actually few people who make consistently money out of that.
The reason for this is clear for me: Most of us are non professional investors. This means we are up against against a vast horde of trained and well equipped professionals: These people have faster access to the market than we, they have a better infrastructure to capture the signals than me, they have computer models that can do all of this for them. So, what chance do I as an individual with a day job and kids to be better than them? Must be close to zero.
Don’t get me wrong, I am not saying you should not invest. All I am saying is that you need to choose the investment style that fits your life and personality. For me, this is not day trading or leveraged trading. It is investing in the markets for the long term. I do this via index investing. As a result, I invest each month an amount of money. I therefore should not be worried about the price of the index today.
The price of the index is not always the value of the index. The difference between the price and the value is the determined by the sentiment on the market, the number of people willing to jump in, the alternative investments out there. The value is rather what something is worth over time.
What to do then?
One of the obvious things that I could do, is to go less often to the news websites. this is something that I try to practice already. It is difficult, as I want to stay informed of what is happening in the world around me. But going less often, means getting less triggers.
Next to that, I try not to actively look at this number or graph. And above all, I now start to realize passively that this number is meaningless to me. It has the save value of any other random number that you can come up with.
What also helps for me is to look in detail once a month to the value of my portfolio and publish the numbers here. This smooths out the roller coaster a lot. Not only due to the “once-a-month” effect, but also due to the fact that my full portfolio is not 100 pct equity. This provides also a smoothening effect and has a positive effect on my sleeping pattern.
How do you deal with the info bombarding on how the markets are doing? how do you filter it out?