Thursday, October 15, 1998

My Portfolio's Down. Oh Boy!
by Michael Rasmussen ([email protected])

My portfolio dropped today. Oh boy!

My portfolio dropped in value today and it's good news. No, I don't have any short positions. I'm happy because my portfolio dropped less than the Dow Jones Industrial Average and the S&P 500.

"So what?" you may ask. "You still lost money."

The frequent loss of money is part of the ebb and flow of investment. In the same way I lose breath with each exhalation. In the same way that a tide pool loses its life blood each time the tide falls. This pattern of rise and fall, rise and fall in stock values is so regular that I expect to loose money a couple of days every week.

This is one area where you can use a stock chart to predict the future. Take a look at any stock chart and what do you see? A squiggly line. One that goes up and down, up and down, up and down. Or maybe down, down, up, down, up, up, down, up, down, up, up, up. In every case, it involves ups and downs in a seemingly random order. You can count on any individual issue, or portfolio, or index to jiggle up and down through any stretch of time. Looking back on the last year of SPY, the S&P 500 depository receipts, the results were 104 days down, 99 days up and 10 with no change.

Since I know that daily price fluctuation is ephemeral I have to look elsewhere to check the health of my investments. I look to the DJIA and S&P 500 movements. When you look at their long term performance, say 10 to 15 years, you see a persistent upward trend. So I know that if I do better than those averages, whether it be a gain or a loss, then I'm heading for a long term gain.

So it's OK that I'm down today. I'm down less than the upward trending market averages.

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