Chasing Performance Is a Fool's Game
-Bob DylanNEW YORK (TheStreet) --At around 1,300, the S&P 500 was recently trading around 8% below the highs it made last spring, although it's still up by more than 3% for 2012. How does the performance of your stock portfolio compare?
Did your manager hold shares of J.P. Morgan Chase(JPM) when the recent news of its huge trading loss broke and its stock tanked? Did your manager fail to buy Apple(AAPL) before it enjoyed spectacular gains?
Should you care? My answer is no, if you made good decisions about how to invest your money in the first place.
For those who check their account constantly and fret when they find its performance lags major market indices, my advice is to take a deep breath and relax. Be patient. If your portfolio is being managed by a trusted professional that has articulated an intelligent strategy to you and appears to be following it, you should let their strategy play itself out for a while before second-guessing yourself out of it.
Too many people are under the impression their investments should always be showing superior performance to market averages. Otherwise, they think, what is the point of paying a so-called expert to manage my money?
The truth, however, is that winning investment strategies actually require periods of under-performance -- sometimes extended periods. For many investors, their ability to stick to their decisions and endure these moments of doubt and unease is what ultimately decides their success or failure as an investor.
Don't believe me? Let's examine some facts: