With 2020 off to a strong start, I wanted to write about something other than market prognosticating. As stocks march relentlessly higher, account values are also rising. Many accounts are hitting all-time highs. When we see the highest mark our account has achieved that 'peak' becomes the baseline to which we judge our investments going forward. Unfortunately, those high values often prove to be illusory. Markets are continually fluctuating, and attachment to a high-water mark often leads to unnecessary suffering. We all know that markets and money do not move higher on a daily or undeviating basis.
When the portfolio falls below peak value, we question ourselves. We ask, 'why is my account down? Or 'why didn't I sell at the top'? Or say 'I'm "losing" money, and I don't like it.' As homo sapiens, our brains are wired in a way that makes most of us risk-averse. Losing hurts more than winning feels good. When our account is not at its highest point, we are bothered. It's also habitual for many of us to overly focus on our investment portfolio. By continually monitoring it, we feel as if we have some control over the direction that it moves. In reality, the market is a place to buy and sell companies. And if you are in the right companies, then values will grow over time, and volatility becomes an opportunity. There is no easy answer on how to become less attached to higher values. It's a hard habit to break. I believe investors should have some awareness of their account worth. Nonetheless, by focusing on the quality of the underlying company vs. the correlating stock price, we can begin to become less concerned about daily, weekly, or monthly price movements, thus experiencing less anxiety from our investment portfolios.
As Ajahn Chah wrote, "If you let go a little, you will have a little peace. If you let go a lot, you will have a lot of peace; if you let go completely, you will have complete peace". Hopefully, a little less attachment will help bring some sense of equanimity.
Regards,
Andre McClure
KDM Capital