Markets Biggest Problem
The market gives you a price—not instructions.
What This Means
I’ve been using this analogy with clients for more than 20 years because I think it perfectly explains one of the biggest challenges investors face.
The stock market gives you a new price every second of every trading day. Most people think that’s a benefit. I actually think it’s one of the market’s biggest problems.
Imagine if your home had a screen outside displaying a new value every day. Some days it would be worth more. Other days it would be worth less. Even though nothing about the house itself had changed, and you don’t plan on moving. You’d probably start reacting to those price changes.
That’s exactly what happens in investing.
The constant stream of prices pulls investors into short-term thinking and emotional decision-making. But just because the price of an investment changes doesn’t mean the value of the business has changed.
After more than two decades of working with investors, I’ve found that the people who tend to have the most success aren’t the ones watching every market move. They’re the ones who stay focused on their long-term plan and don’t let daily price changes influence every decision they make.
A market price is simply an opinion at a moment in time. It shouldn’t become your investment strategy.
Common Questions
How can I stop watching my investments so often?
This takes discipline because, for many people, checking their portfolio has become a habit. Like any habit, it takes time to break.
Start by watching less financial television and checking your portfolio less frequently. Remember, you’re investing for the next 10, 20, or 30 years—not the next month. The week-to-week swings that seem so important today usually mean very little in the bigger picture.
Why do I start panicking when my portfolio goes down?
Because you’ve become anchored to your portfolio’s highest value. When your balance falls, it feels like you’re losing money, even though market declines are a normal part of investing.
Don’t compare your portfolio to last month’s high. Compare it to where you were five or ten years ago. Long-term progress is what matters.
How often should I check my holdings?
Remember This:
The less you watch, the better you invest.