Wednesday, February 28, 2007

Ouch.

I have lost over $5000 in the past couple of days. No, I wasn't buying more furniture for my apartment-- it was that pesky stock market. Though I have a few mutual funds that did well in yesterday's big slump because they invest in bonds, most of my funds took sharp dives. But that is how it goes. It's moments like these that are the downside to paying close attention to your finances-- it's hard to just sit here and tell myself I have to just roll with it and hope things will recover. My investment philosophy is pretty hands-off: I try to buy things that will give me a portfolio that is appropriately balanced for someone my age, or maybe even a little on the conservative side. I don't have the necessary knowledge or time to mess around with making a lot of trades to try to take advantage of changing conditions in the market. And as most people have probably read elsewhere, even those with specialized knowledge who devote themselves to this stuff full time don't necessarily do any better than overall market indexes, or even, in some stories, portfolios picked totally at random.

In the last decade or so, technology has enabled the average person to be get much more involved in managing their own portfolio of investments. And it sometimes seems, at least to me, that this has led to a lot of people seeing themselves as these hot-shot players, and they're always talking about all these smart moves they're making. And for a few years, whether or not these people had any idea what they were talking about, it probably wasn't that hard to do well given the strength of the overall market... more recently, I'm sure some of these players aren't feeling as confident.

For most people, money shouldn't be a game. Our hard-earned savings aren't something to be played around with for watercooler bragging rights. I've tried to find a balance between hands-on and hands-off, between educating myself about financial basics so I can have some degree of control over my overall strategy and admitting that there's a lot I'll never know and just have to entrust to the hands of invisible strangers.

One of the things on my 2007 to-do list was to sit down and take a critical look at my investments to make sure they still seem appropriate based on generally accepted guidelines... but beyond that, my attitude will pretty much be "Don't Mess With It."

9 comments:

Anonymous said...

Buy! Buy!

Bitty said...

Yeah, anonymous probably has it right.

On our local NPR station, a local money adviser used to have a weekly spot. Maybe he still does, and I've just missed it. Anyway, he was big on emphasizing NOT to worry about the value of stock at any given time, but to remember that you have X shares of an asset, and even if the market as a whole goes down, in the end it trends upward again. You still have the asset. I know I'm not explaining it as well as he does. Ah well.

He also emphasizes buy, buy, buy when prices are down. If only I had a little scratch...

mOOm said...

Well a randomly chosen portfolio = the indexed market portfolio (if it has enough differen securities in it) :)

This is why I continuously post data and statistics on my investment and trading performance rather than just bragging about the best trades. I see very few people who actually report this stuff at this level. It is a VERY steep learning curve and it takes a lot of work to improve and become successful if you really want to manage "your own hedge fund" like me. Most people who try trading lose and give up (just like any small business). I think one can do better than the indexed buy and hold approach at least over the medium term (less volatility) without a lot of trading but it takes a lot of sophistication to get to that level all the same.

nhcardhunter said...

Don't try and time the market. You'll never win that way. Find yourself a comfortable seat, have a cup of coffee or tea, and relax....you'll be fine

Best

Jim

fin_indie said...

Great post. There really is no prize for being the "hot-shot" of the day. I like to keep looking at my investments with an eye towards how much risk I am taking on. If the market is as it is right now, I don't want to be taking a lot of risk.

Anonymous said...

When the market goes down like this it is only a problem if you need to money in the short term. I keep an eye on my investment and YTD it is now 0.2% after drop yesterday but when I look over 3 months I am still on 9.3% growth. So it is not too bad. The last drop happend in May 2006 and after a couple of months the market had recouperated and 2006 ended up being a really good year.

So take it easy since you are investing not gamblilng on the short term gain.

citygirl said...

Just wanted to say that I LOVE YOUR BLOG. I've been a loyal reader ever since you showed up in Marie Claire last fall and I have learned so much! In fact, you inspired me to start my own blog a few weeks ago. You can check it out at:

http://mylifeasaprgrad.blogspot.com

Keep the great advice coming!!

moneymonk said...

Very Nice. You did for well in Feb.

Anonymous said...

You lost more than I did when finding an apartment...at least you know how to buy stocks...I want to do it once I get a job and pay all my debt