Tuesday, 10 July 2012

Want to be a better investor? Chuck your online portfolio

There are many things which you can do to evolve as better investors. Multidisciplinary learning, reading annual reports, deep knowledge in some business areas, asset allocation, position sizing, concentration vs diversification, portfolio management etc. In this post, I want to share one area which subtly pushes you to becoming a better investor.

These days nearly everyone maintains an online portfolio. These portfolios provide real-time (or delayed by a few minutes) portfolio value. It maintains your buy price, number of stocks, current market price and total current market price of holding.

Now let me come to why you should NOT maintain an online portfolio. It is important to know and understand what action we are taking based on the information I possess. Having an online portfolio does not help in taking any action. For example, if the market value of your portfolio rises 0.5% on a day, do you start thinking that "Wow, I am 0.5% richer, let me sell all my holdings!!". You don't. You mostly stare blankly at the computer/mobile/tablet screen and feel happy (if the portfolio is up), sad (if it is down), very happy (if it is up more than the index) or very sad (if it is down more than the index). So, if you don't really do anything productive with your online portfolio, isn't it time to question why you need it in the first place?

Here are some distinct benefits of NOT having an online portfolio:
  • You don't waste time on tracking prices on a daily (or hourly) basis
  • You actually do something productive with your time (like reading annual reports, sector reports or getting your day-job completed)
  • Your time horizon for investing increases as you are not on a minute-by-minute tracking mode
  • You maintain an offline (paper or simple spreadsheet) and update the prices once-a-quarter (or more infrequently if you like). Simple fact of having to look up individual prices will deter you from updating frequently!!
  • You will limit the number of stocks in your portfolio from 100s to a much lower number if you have to track prices manually!!
This is one easy way to inculcate a good investing practice. (Apart from stopping to listen to the chatteratti on CNBC). Try it and see if it works for you.

3 comments:

  1. What a co-incidence. Today only I have decided that I will watch my online portfolio on moneycontrol.com only once a week (seems to be difficult but will try). Though, I watch my portfolio only 2-3 times a day but I realize that even that causes unnecessary distraction and fear or overconfidence, depending on which way your portfolio moves. This is despite the fact that I am following value investing principles in all my picks. For now I will try once a week rule and see if it reduces my anxiety or not.

    ReplyDelete
  2. There is one advantage of an online portfolio. When it comes to computing capital gains tax, one can simply take a print out of the online portfolio and hand it over to the CA.

    ReplyDelete
    Replies
    1. You need to hand over your capital gains once in a year. That can very well be done offline as well. To me the benefits far outweigh the troubles.

      Delete

ValuePickr Goa Meet - Disruptions in Technology

This year my main presentation at the ValuePickr Goa meet was on disruptions from technology. Being from the tech industry, this is a top...