There is a weird thing that happens when you haven’t seen someone in a long time. ANY changes that have taken place with regard to their appearance become amplified. You immediately notice, and usually comments ensue.
Your portfolio is no different, and I will explain why.
Imagine a friend/co-worker/family member who you have not seen in a year or so…..now assume that you run into them at the grocery store, and they look significantly skinnier than you remember. They’re so skinny that you worry that they might have a terminal illness, or that they are going through an incredibly stressful time in their life. Not wanting to insult them, but still having to satisfy your curiousity, you might say something tactful like this:
“Wow! Look at you! You have lost a ton of weight. You look great! What are you doing? How much weight have you lost?”
Normally, when this happens, the person looks at you funny and answers something moderate like
“20 pounds, I’ve only lost 20 pounds.”
This is puzzling. You feel like a moron. You could’ve sworn that they had dropped over 100 pounds since the last time you saw them. But it obviously just sticks out more to you since you do not see them every day. Those people that DO see them every day don’t notice the gradual weight loss as much, so they are not constantly telling the person that they look great. That is why they are so confused when you prattle on and on at the grocery store. They think to themselves… “I haven’t lost THAT much weight. I must’ve been very fat before.”
This works with height – think grandma seeing grandson once a year at the family reunion – “MY, how you’ve GROWN!” Meanwhile, Sammy has only grown a quarter of an inch.
This works with hair color – someone you haven’t seen suddenly gets a little gray hair, and when you see them, all you can think about is “I cannot believe they have gray hair” while you awkwardly stare at the gray spot while trying to hold a conversation.
What if the long, lost friend shows up at church with an eye patch, or a nose ring…that is ALL you can think about, right? I can feel your agreement as you read this
Well, this works with your money too.
Absence can create ab-cents. See what I did there? I was clever. I’ll be here all week. Try the veal. Tip your waitresses. Good grief that was bad …and if I had more time I would delete that line, but in the spirit of letting you inside my trainwreck of a brain, I will leave it.
Not watching your money second by second helps you. Here’s how: *if you check your portfolio every day, even if it grows, it seems immaterial.* The ups seem small, and the downs feel large. It is frustrating. We want instant gratification, and investing doesn’t work that way. Then, when it comes time for your annual review with your advisor, and they show you the amount you invested 10 years ago and how much it has grown, you are shocked…in a good way. Sometimes you’ve even surprised with how much money you made over the last year! I have seen it personally as I tell people what their money has done…they’re surprised.
I am not advocating neglecting your portfolio, and never checking it. What I am saying is that those that keep track of every up and down become irritated that they haven’t made more money, or outperformed some meaningless index.
I truly believe that those that do not watch their money incessantly outperform the micro-managers over time. They are happier. They don’t worry as much. They realize that the day to day movements are meaningless to their long term goals. Also, when they eventually decide to check their portfolio…
(in Betty White’s grandma voice) “MY, MY, HOW YOU’VE GROWN.”
Dollars and absence create dollars and cents.