I made 2% the other day. Break out the champagne?

Paying too much attention to short term share market movements can be counterproductive. Here's why…

| More on:
man celebrating with bottle of champagne at a party

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

My portfolio went up 2% on Tuesday.

If you think that's impressive, then no, I'm not boasting.

If you think that's unimpressive, I'm tipping you've spent too long trading cryptocurrencies!

2% is, in the context of a single day's market trade, unusually good.

Better, considering the market was only up 1% the same day.

But still, I'm not boasting.

See, the ASX gains an average of something like 10% per year, inclusive of dividends.

Let's assume dividends are around 4% per annum (a reasonable guess, given an ASX 200 ETF is paying out 2.84%, but the banks are yet to get back to pre-COVID dividend levels), and the Year 1 maths says that the average share price gain is around 6%.

That means I got a full one-third of the average yearly gain in a day.

The market went up by one-sixth of the same benchmark.

No. Still not boasting.

Exactly the opposite.

Because when we talk about the ASX's average yearly gain, that hides a helluva lot of volatility.

So yes, it was nice to make 2% on Tuesday.

But some of those winners — including companies I own like Kogan.com Ltd (ASX: KGN) and Corporate Travel Management Ltd (ASX: CTD) — have had a helluva last 6, 12 and 18 months.

In the last 12 months, CTM has been as low as $8 and as high as $22.

Kogan has been as high as $25 and as low as $8.70.

Kinda makes that 2% rise, though welcome, look a little anaemic, doesn't it?

(And Kogan fell 6% yesterday. Did I mention the ASX can be volatile?)

Don't get me wrong: I reckon you should take the wins when you get 'em.

But remember there'll be bad days, too.

And that the number of 'up' days is often not that many more than the 'down' days… but the net result of all of those ups and downs tends to be up, over time.

It's why paying attention to short term movements is usually counterproductive.

You can't just have the good days.

You can't avoid the bad days.

You've gotta take the bad with the good.

I wish I could make it different, but I can't.

So yep, I really enjoyed Tuesday.

Yesterday? Not so much.

But better than both is getting to a point where you realise that neither is important in the overall scheme of things.

You need to learn to enjoy the good days a little less… because that also helps the bad days hurt less.

And, in the long run, that helps you avoid acting out of fear, greed, pain or pleasure.

It puts your rational brain back in charge of your emotions.

Hard, but worthwhile.

And, in all probability, much more profitable.

See you tomorrow at our Live Facebook Q&A!

Fool on!

Scott Phillips owns shares of Corporate Travel Management Limited and Kogan.com ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited. The Motley Fool Australia has recommended Kogan.com ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Motley Fool Take Stock

Man holds young girl out in a flying motion as mum watches on, all in front of a motorhome.
Motley Fool Take Stock

My 'going on holidays' investing strategy

Some (early) holiday reflections...

Read more »

investing and camping analogy represented by camp side next to ute
Motley Fool Take Stock

What the bush taught me about investing

Bushcraft basics for intelligent investing.

Read more »

Businessman lying on the grass and looking at the sky.
Motley Fool Take Stock

The ASX is closed. Now what?

Aesop’s advice for investors.

Read more »

Cubes with tax written on them on top of Australian dollar notes.
Motley Fool Take Stock

The new Super tax is a bad tax

There are three problems.

Read more »

Warren Buffett
Motley Fool Take Stock

End of an era: Buffett to step down

The Oracle of Omaha will end a 60 year reign.

Read more »

A woman sits in a cafe wearing a polka dotted shirt and holding a latte in one hand while reading something on a laptop that is sitting on the table in front of her
Motley Fool Take Stock

Motley Fool TV LIVE and FREE at 8pm AEST

Applying the Pareto Principle to your investing.

Read more »

A person holds strong behind their umbrella as they weather the oncoming storm.
Motley Fool Take Stock

Are you ready for today's falls?

ASX futures suggest that we’ll drop by a bit over 4% today.

Read more »

A financial expert or broker looks worried as he checks out a graph showing market volatility.
Motley Fool Take Stock

An antidote to market meltdown mania

We're LIVE and FREE on YouTube soon.

Read more »