There are just a few days left in 2018 and it’s tempting to make some last minute moves to improve your annual results in the old portfolio. But is it a good idea?
This is obviously not my first ‘last few days of the year’ experience as an active market participant. I know the feeling, trust me. I’ve made the mistakes. I’ve gotten cute. I’ve overextended myself in late December for absolutely no reason. It’s those scars that I keep with me after all these years that remind me not to do it. It’s like a kid with a hot stove. After he gets burned once, he won’t ever make that mistake again!
The financial media loves to make you feel stupid for missing out on certain moves. Your friends and neighbors like to remind you about how well their portfolio is doing and all of their brilliant investments. It’s easy to get caught up in this nonsense.
I like to observe. It’s amazing how much you can learn if you just shut the F&$% up and pay attention. What are the most successful investors doing this time of the year? Are they pressing their trades and initiating new ones? Or are they spending time with their friends and family? Are they running office meetings on December 28th or are they on vacation on a boat somewhere?
You’ve had almost 12 months to make money this year. You’ve had plenty of time to do the right thing and make the right decisions. Is NOW the time to make up for any mistakes? I’d argue, no.
I’ve learned (the hard way) that this is the time to take a step back. Go do some yoga and reflect on the past quarter, the past year and even the past few years. How have things changed? What did I do right? What did I do wrong? What could I have done better? Where was I too greedy? Where was I not greedy enough? Did I read the books I told myself I would read? Did I stick to the plan that I wrote out for myself? Was I reckless in my position sizing and risk management? Was I too conservative at times where I should have been pressing my good fortune?
What sort of content did I consume this year? Did it help me or hurt me? Am I watching basic cable tv and listening to people who, by definition, have no idea what they’re talking about? Am I listening to people who choose to gossip about markets, rather than those who actively participate in them? Am I putting too much weight on statistics based on tiny sample sizes rather than focusing on the price behavior right in front of me?
Am I focusing on the near term and getting lost in the short-term noise when I should be taking a step back and addressing the more structural picture of the markets? Or am I thinking too long-term and not managing risk appropriately enough because some random financial advisor told me that ‘buy and hope’ is a real strategy, “60/40 split bro, compound interest, you’re good”. It’s like that “set it and forget it” Rotisserie infomercial from back in the day. It’s a cute pitch, but it’s a bunch of bullshit.
How much writing did I do this year? Am I writing enough? Am I writing too much? Am I writing for the right platforms? Am I writing for myself, or to satisfy others? Am I keeping it real, or am I holding back? Am I being myself, or am I trying to front?
Did I spend enough time this year doing other things, outside of the market? Dr. Brett Steenbarger and I had a great conversation earlier this month about this very topic. I encourage you to give it a listen. If the market is the most important thing in my life, then on bad days, my life is going horribly wrong. But if there are many other aspects to my life, then a bad day in the market is a bad day in just one of many parts of my life. How is my day to day behavior reflecting this?
Am I learning enough? Where did I travel this year? Who am I interacting with? Is it the same people in the same places talking about the same things? Or am I putting myself out there to enjoy new experiences, with different types of people who bring different perspectives?
I can continue to add to this list and we could do this all day. But the point I want to make is that the questions I’m asking myself may be similar to the ones you’re asking. More than likely, however, the way you reflect will be different than the way I do. But reflecting on the prior quarter, year and years is important, especially in late December, I’ve found.
I would rather get ready for 2019, than try and get cute to finish up 2018 on a “good note”.
Less trading, more reading, more exercising, more reflecting. That’s how I want to approach this week.
I’m in the process of putting together my 2019 Q1 Playbook. It will be out shortly and it’s going to be a doozy!