My Newz Room – Daily Breaking News
  • Home
  • Automotive
  • Business
  • CBD
  • Crypto
  • Education
  • Entertainment
  • Fashion
  • Finance
  • Health
  • Home Improvement
  • Law \ Legal
  • News
  • Shopping
  • Sports
  • Technology
  • Travel

Subscribe to Updates

Get the latest creative news from FooBar about art, design and business.

What's Hot

Land Transportation Of A Boat – A Step-by-Step Guide

February 6, 2023

Child welfare algorithm faces Justice Department scrutiny

February 1, 2023

Peninsula mountain lion attack sends child to hospital

February 1, 2023
Facebook Twitter Instagram
  • Home
  • Need Help?
Facebook Twitter Instagram
My Newz Room – Daily Breaking News
Demo
  • Home
  • Automotive
  • Business
  • CBD
  • Crypto
  • Education
  • Entertainment
  • Fashion
  • Finance
  • Health
  • Home Improvement
  • Law \ Legal
  • News
  • Shopping
  • Sports
  • Technology
  • Travel
My Newz Room – Daily Breaking News
Home»Finance»Don’t Anchor Yourself To Your Portfolio High-Water Mark — My Money Blog
Finance

Don’t Anchor Yourself To Your Portfolio High-Water Mark — My Money Blog

By No Comments3 Mins Read
Facebook Twitter LinkedIn Telegram Pinterest Tumblr Reddit Email
Share
Facebook Twitter LinkedIn Pinterest Email

[ad_1]

Inside various financial forums, I am seeing the “anyone else worried?” 😓 posts as most portfolios are down double-digits. For a retiree with a $1 million portfolio, seeing $100,000 or $200,000 of value evaporate is understandably stressful. However, much of this is because you are comparing to your portfolio’s all-time high, or high-water mark, which is a relatively arbitrary number. Just because at one moment in time, there were a few willing buyers of your assets for a given price doesn’t mean you should anchor yourself to that number.

Step back and have some perspective. I would offer up this historical performance chart of the Vanguard Target Retirement 2050 Fund (VFIFX) as evidence that things really aren’t that bad if you take a step back. This chart tracks the growth of a $10,000 investment place in 2012 in this all-in-one Target Date Fund. Taken 5/30/22.

  • As of 5/30/22, the 10-year trailing return for VFIFX is 10.28% annualized even after the recent drop. Can you reasonably ask for more than 10% average annual returns for a decade?
  • If you invested in January 2020, right before the COVID pandemic started, you are still up 18.7% if you held through today.
  • If you invested funds anytime between January and August 2020, those funds are up even more than that!
  • The last time your investment value was this low was… March 2021. That’s it.

Things might get much worse, things might get better and never look back, I don’t know the future. This is another reason why I no longer check my portfolio balance on a daily basis. How can I say that, when his whole blog was once based on the idea that I would share my net worth every month?! Back then my savings rate was much more significant than my portfolio performance. Side hustle money made a big difference and I felt in control. These days, the opposite is true. The portfolio movement overwhelms our savings contributions.

Track something better. If you keep staring at that portfolio balance, you’ll get overly excited when you hit an arbitrary number like $50,000 and then get really depressed if it drops below and stays there for a while. You need to track something better. If you are still in the accumulation phase, your metric for success could be:

  • Your 401(k) contribution rate. A reasonable target might be 15% or higher.
  • Your overall savings rate. Heck, if you are tracking this number at all, you are probably way ahead of the game.
  • Your side hustle monthly total. If your day job has a fixed salary, you might focus on the side income instead.
  • Your portfolio’s 2-year trailing average or similar. Anything that has a longer time horizon and offers more perspective.

If you are in the spending phase, you could track something like your spending rate as a percentage of portfolio, and if that’s still reasonable then go back to enjoying your life. You may also explore a dynamic spending strategy.

Bottom line. Your quoted portfolio value in November or December 2021 doesn’t matter. If you tell yourself stuff like “I’ve lost $XX,000” since December 2021, you are experiencing the anchoring cognitive bias.

[ad_2]

Share. Facebook Twitter Pinterest LinkedIn Tumblr Email

Related Posts

$833 a Month x 10 Years = $145,000 (2013-2022) — My Money Blog

January 30, 2023

70,000 Miles + $100 Statement Credit + $122 Companion Fare — My Money Blog

January 26, 2023

How to Claim Your State Income Tax Exemption — My Money Blog

January 26, 2023

CreditUnion1 High Yield Savings Plus $1,000 Deposit Bonus — My Money Blog

January 25, 2023

Link Your Brokerage Account, Get Shareholder Perks — My Money Blog

January 23, 2023

Historical Factors and Charts — My Money Blog

January 23, 2023

Comments are closed.

Our Picks

Land Transportation Of A Boat – A Step-by-Step Guide

February 6, 2023

Child welfare algorithm faces Justice Department scrutiny

February 1, 2023

Peninsula mountain lion attack sends child to hospital

February 1, 2023

LeBron James reaches 4th all-time in assists, inches closer to points record in 129-123 win over Knicks – The Mercury News

February 1, 2023
Recent Posts
  • Land Transportation Of A Boat – A Step-by-Step Guide February 6, 2023
  • Child welfare algorithm faces Justice Department scrutiny February 1, 2023
  • Peninsula mountain lion attack sends child to hospital February 1, 2023
  • LeBron James reaches 4th all-time in assists, inches closer to points record in 129-123 win over Knicks – The Mercury News February 1, 2023
  • Heat score statement road victory in pushing past Cavaliers 100-97 – The Mercury News February 1, 2023
Archives
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • August 2021
Facebook Twitter Instagram Pinterest
  • Home
  • Need Help?
© 2022 - My Newz Room- All Rights Reserved.

Type above and press Enter to search. Press Esc to cancel.