Friday, September 23, 2011

paper losses

In the face of an unusually bad week in the stock market, perhaps it is finally time to put together my thoughts on this. I was noodling around with a similar post a month ago after a few straight weeks of poor stock market performance back in August. While I have easy access to news and information, the distance of being overseas, especially so far away makes this seem like such a insignificant issue. I think the 12 hour time difference from back home (or whatever it is), and thus the 9 hour difference with Wall Street makes it even more detached. By the time the markets open, it's dinner time here and checking on early morning market action is hardly at the top of my to-do list at that point in the day. What lessens the seeming impact of the news is undoubtedly the lack of video information and talking (screaming?) heads expounding on the market's performance. Everything seems less urgent when the delivery isn't from an armchair analyst yelling into the camera.

As for significance, it is quite significant despite the dampening of the delivery. On paper, market losses are quite noticeable as I do track these things. However, my investment style, like aspects of my personality, is quite conservative. Yes, stocks are down, but I don't care. Well, I don't worry. Undoubtedly, a big portion of my non-worry is from my non-need for currently held investments to be providing a meaningful source of income. I'm young, work a lot, and spend very little. This means I have time to reap the benefits of compounding interest, have little time to spend money, and will continue to accrue capital. Work has also meant that I have little time to actively manage any investments. This has resulted in two manifestations of my conservatism.

First, a meaningful fraction of what I have is effectively uninvested. I spend so much time with work that I have not taken the time to actually research and weight a lot of potential investment choices. In a practical sense, this really means I should be in mutual funds and diverse portfolios. In times like these, having available cash means available opportunities. If you believe in whatever your underlying investment theses are and that stocks (at least some of them) are under-valued, then this is a great time to use available cash and increase investments.

Second, I like dividends. There is something rather nice about a boring utility that wants to just give you 5% back every year. I'm perfectly fine with Exelon unsexily producing electricity or Waste Management taking out the garbage. Big-time growth? No, not really, but that's not the point. They are dramatically boring and that is a very good thing.

There is something that is arguably a third manifestation of my conservative nature and that is the fact that I track all of this. I have mentioned this before, but I used to track all aspects of my finances with Quicken starting after college up until the time I moved to Hungary. What happened then is that for a personal laptop, I traded in my old Dell Inspiron for a black MacBook. One of the downsides of that switch was that Intuit did not have a good Quicken product for Mac at the time and one could say that they still don't, so I stopped tracking, well, everything. (Yes, I tried Quicken Essentials for Mac and I think it is terrible.) I went from a certain level of compulsion with my finances to not keeping tabs on it anymore. Now, this isn't to say that anything untoward happened to my financial situation during this time. In fact, it was quite the opposite. I was making more, and spending substantially less since working overseas meant certain benefits I did not have Stateside. However, this lack of Quicken bothered me to no end and that along with other factors led me to eventually abandon the MacBook and go back to a Windows laptop earlier this year. I have resumed my obsessive Quicken ways and was able to resume my old data file and even fill in the biggest missing chunks of financial history. There are some kinks to work out, but I'm back on track for my tracking.

The only issue that has kept me from both caring more and being more pro-active is time. However, that is also changing (somewhat) with work rotation so I can get back to research and back to small, risky investments as well. Hey, as much fun as dividends are, some small amount of aggressive investing helps keep my attention and keeps the interest up. Soon, it will be time for some paper gains.

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