Paying too much attention to short term share market movements can be counterproductive. Here’s why…
The post I made 2% the other day. Break out the champagne? appeared first on The Motley Fool Australia. –
My portfolio went up 2% on Tuesday.
If you think that’s impressive, then no, I’m not boasting.
If you think that’s unimpressive, I’m tipping you’ve spent too long trading cryptocurrencies!
2% is, in the context of a single day’s market trade, unusually good.
Better, considering the market was only up 1% the same day.
But still, I’m not boasting.
See, the ASX gains an average of something like 10% per year, inclusive of dividends.
Let’s assume dividends are around 4% per annum (a reasonable guess, given an ASX 200 ETF is paying out 2.84%, but the banks are yet to get back to pre-COVID dividend levels), and the Year 1 maths says that the average share price gain is around 6%.
That means I got a full one-third of the average yearly gain in a day.
The market went up by one-sixth of the same benchmark.
No. Still not boasting.
Exactly the opposite.
Because when we talk about the ASX’s average yearly gain, that hides a helluva lot of volatility.
So yes, it was nice to make 2% on Tuesday.
In the last 12 months, CTM has been as low as $8 and as high as $22.
Kogan has been as high as $25 and as low as $8.70.
Kinda makes that 2% rise, though welcome, look a little anaemic, doesn’t it?
(And Kogan fell 6% yesterday. Did I mention the ASX can be volatile?)
Don’t get me wrong: I reckon you should take the wins when you get ‘em.
But remember there’ll be bad days, too.
And that the number of ‘up’ days is often not that many more than the ‘down’ days… but the net result of all of those ups and downs tends to be up, over time.
It’s why paying attention to short term movements is usually counterproductive.
You can’t just have the good days.
You can’t avoid the bad days.
You’ve gotta take the bad with the good.
I wish I could make it different, but I can’t.
So yep, I really enjoyed Tuesday.
Yesterday? Not so much.
But better than both is getting to a point where you realise that neither is important in the overall scheme of things.
You need to learn to enjoy the good days a little less… because that also helps the bad days hurt less.
And, in the long run, that helps you avoid acting out of fear, greed, pain or pleasure.
It puts your rational brain back in charge of your emotions.
Hard, but worthwhile.
And, in all probability, much more profitable.
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