Tips For Keeping Your Portfolio Valuations In Perspective


Most Americans are not financial professionals. That means it’s important to not react emotionally to sudden moves up or down in the valuations of our retirement or personal investing portfolios. A recent report from highlights that many Americans “overwatch” their portfolio valuations, or worse, react in a knee-jerk fashion and sell an investment on a downswing.

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Portfolio Valuations

A portfolio valuation snapshot offers limited information

The current valuation of a portfolio is a just a one-time snapshot of the current value of your assets, and is not in any way predictive of your portfolio valuation in five, 10 or 20 years. Unfortunately, it’s difficult for many people to keep a long-term perspective when it comes to portfolio valuations, and they feel they have to do something when their portfolio suffers a significant loss.

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Portfolio Valuations

Modern equity markets are very volatile, and stocks often way over-react to good news or bad news. This means that all except the largest and most diverse portfolios will occasionally experience days, weeks or months of large gains or losses. Individual investors who constantly monitor the valuations of their portfolios are often sucked into making a hasty decision to sell when one or two of their holdings receives some bad news. Of course, in most cases, the best time to sell is when there is good news and shares have made a nice move up.

The “Dos” of regularly tracking your portfolio valuations

  1. Do think about and reconsider your long-term strategy if circumstances change. Don’t be shy about expressing your concerns regarding an investment to your financial adviser. There is a right time to sell every investment.
  2. Think about your portfolio over the long-term. If you just had a poor month, then stop and take a look at the quarterly, annual and multi-year performance. If things are still disappointing, then maybe you should consider making changes.
  3. Do remain disciplined. It’s ok to make changes in your portfolio because you see a good opportunity, but it’s generally not a good idea to rebalance your portfolio every quarter or six months just because you weren’t happy with recent returns.

The “Donts” of regularly tracking your portfolio valuations

Portfolio Valuations

  1. Don’t expect your portfolio to be up every time you check it. That’s just not the way things work.
  2. Don’t expect that your portfolio will perform the same as the Dow Jones Industrial Average or the S&P 500 Index. Individual portfolios have a different mix of holdings than major indices and do not perform in lockstep with them.
  3. Don’t get “down” on a fund, sector or asset class based on recent performance. It’s always a good idea to revisit your investment thesis, but as long as the thesis remains solid, selling when an investment is at a low ebb is generally a bad idea.
  4. Don’t fret over low bond returns. The macroeconomic conditions that impact bond yields are out of your control. If current bond yields are not sufficient to meet your investment objectives, find another investment.

Portfolio Valuations

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