My Lennar Corp (LEN) is down a wee bit today; not unexpected after yesterday's Fed rate hike. Toll Bros (TOL) is down over a buck a share, though. Blackboard (BBBB) is also down very slightly, but New York & Co. (NWY) is up 31 cents a share, and I own 53 of NWY and only 11 of TOL, so I came out a couple bucks ahead on the day. $5560.58 is the final tally at the bell.
As if to justify the sale of my shares yesterday, Neenah Paper (NP) went down another few cents. (It doesn't really justify anything, of course. It could rocket up next week or next month.)
When my portfolio closes around the same value a couple days in a row, I tend to start thinking of this price as the new "set point." For example, right now, losses from $5550 will feel "painful." I have to watch out for this; it's entirely in my head. 10.5% in a little over a month of paying attention to my investments? I'm doing extremely well. So well, in fact, the phrase "beginner's luck" comes to mind. I could lose most of my gains next month and still be beating the market. I have to stop thinking in set-point terms -- I can't be panicking every time I see a little dip.
I'm getting better at this, though. A couple weeks ago my portfolio closed at nearly $5500 on a Friday. By closing on the following Monday, it had dropped to a little over $5300. This is the sort of thing that would have stopped my heart when I started out, but I sat tight, and that money came back -- and then some. Thankfully it came back relatively quickly. I'd rather not test my endurance just yet.
I'm not sure you can really learn to cope with volatility except by putting some money into the market and letting it ride. Good companies come back, usually sooner rather than later, and if a good company is down for an extended time, that's a signal to buy more and "average down," not to panic and sell it all. You can read that advice in many investing books. Doing it, however, is harder than I thought it would be. I have to fight my own instincts. I consider myself more rational than most people; I'm somewhat taken aback by my emotional reactions to market events.
I didn't sell the LEN today; I'd hate to sell a basically strong stock on what I firmly believe is a temporary setback. I'll wait until it goes up some more. Letting your winners run is a philosophy that makes sense to me. I'd like to earn at least 10% on it after commission, which would mean seeing it move solidly above $64 a share, but at the same time I don't want to be overweight in homebuilder stocks too much longer, and I think TOL is better, though I don't want to hold that forever either. I'll give LEN another couple weeks.
It may seem odd to hold on to a stock in the hope of earning a measly 10 or 20 bucks, which is what a point or two means when you've invested around $1000, but eventually, I hope to be dealing in much larger chunks, and an extra percentage point will make a bigger difference. Best to develop the discipline now.
Fun tidbit for the day: I have 11 shares of TOL, so when the share price is $101.01 I end up with holdings of $1111.11 in the stock. $102.03 would result in $1122.33. This kind of thing makes me happy. I am such a nerd.
Posted by kindall at July 1, 2005 01:33 PM