When the market slumps, investors tend to take notice, and other panicky investors add to the decline as it comes under the media focus. But when the market recovers, there is not a similar follow-through because the jubilation just doesn’t spread as rampantly.
The Dow Jones Industrial Average closed at 17,793 last Friday, just 2.43% below the all-time high of 18,244.38, which was recorded in February of last year. Very few investors are aware of that fact, however. So, it appears that portfolio loss is more of a concern than market gains.
Actually, the market fluctuations for your own portfolio (all accounts included) should cause more of a personal response than some arbitrary market index. But then, no cable TV station or newspaper covers your investment portfolio—nor mine.
For peace of mind in the short-term, begin to follow your own portfolio more closely. Given the market’s ebb and flow, which will always be raising and lowering your nest egg’s market value, start to place where it is today into some perspective. This becomes even more important as you approach retirement.
My wife and I have five accounts, held at one firm—a hybrid checking/brokerage account, and both a Traditional and a ROTH IRA account for each of us. Late last year, during a period of high volatility, she was concerned about her accounts’ market value. That’s when I realized that she wasn’t set-up to view the entire portfolio. Now she can!
So, now she knows to compare the current month with, let’s say, the end of the prior quarter, Year-End and maybe a year or two before. Always, check how you nest egg is doing as compared to the major indices; however, keep in mind that that can be like comparing apples and bananas. Since your portfolio probably has a mishmash of various securities–including stocks, bonds and cash–a highly delineated stock index would probably not make a realistic comparison. Besides, you’ll retire on your portfolio, and not an index!