Tuesday, December 13, 2005


Go placidly amid the noise and haste,and remember what peace there may be in silence.
(Max Ehrmann, Desiderata, Copyright 1952)

I thought of this poem the other day while watching an end-of-day report on trading in the stock market on CNBC. It captures very nicely my style of investment amidst the daily frenzy of the equity markets.

Most portfolio managers trade more frequently than I do. My twice-yearly trading allows my positions to quietly run their course, often amassing substantial returns while others would “rebalance” away profits. This half-year has been no different in that regard, with energy issues earning double-digit returns.

I have, however, come to terms with the steady drumbeat of sell-side analysts and media pundits, such as Jim Cramer. Daily volatility is now something I expect, as it represents other investors and traders entering and exiting the market on any particular day. These daily price fluctuations assure smooth and liquid trading on the two days per year I will trade. With few exceptions, the actual movement of the market over a few hours on any given day is not that large.

So I now “go placidly”, holding my positions patiently while observing the daily frenzy. No matter how volatile the daily price moves, the monthly volatility is less affected. And so are even longer-term moves of prices and indices. My portfolio may experience some volatility due to short-term market exuberance, but in the longer-term, the superiority of the portfolio’s selections typically reappears. The key is to not succumb to daily or weekly concerns due to traders’ constantly-shifting valuations, but maintaining the discipline of my investment process.

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