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OK, Question for you: Under what conditions do you start to worry about your portfolio?

Sometimes I think reading the financial pages is like reading about which food causes cancer. When I was a kid, anything fake-red, like raspberry jello, was out. Then it was OK after all. Then this, then that … it’s crazy making! So now I just try to eat as “clean” of food as I can (organic, free range, and increasingly less packaged stuff) and don’t worry about what the latest findings are.

As much as I encourage us average Joe/ette Canadians to read the financial papers, I’ve read so many prognostications that shift every few weeks, I’m coming to a similar conclusion about high finance as well.

In today’s Financial Post, for example, I read this:

The swagger in equity markets over the past month evaporated Wednesday as investors in stocks finally succumbed to mounting worries about the economic recovery…
In Toronto, the S&P/TSX composite index fell 256.08 points, or 2.2%, to 11,582.21, its lowest level this month. In the United States, the S&P 500 tumbled 31.59 points, or 2.8%, to close at 1,089.47.

If my entire portfolio drops 2% I do indeed take note. But I don’t make any conclusions about a sea-change in market sentiment. And I don’t feel particularly anxious. I do get anxious if any given company I own has bad news or declining sales. I would get somewhat anxious if there was … maybe about a 5 or 6% overall drop. And I’d freak at about 10-12%. But 2%? I’ll sleep, I guess!

Am I naive? What conditions cause you to stress?

About the Author

Imagine if Canadians were known for being all over their money. Engaged. Proactive. Getting out of debt. Savvy. Saving. Generous. Nancy wants to help. Nancy started her own journey with money over 15 years ago, and formed her company “Your Money by Design” in 2004 to help others along the same path. It’s not the usual financial advising/investment stuff. It’s about taking control of day-to-day finances –managing monthly cashflow effectively, spending appropriately, getting out of debt, saving. If you're ready to take control over your finances, pop by her business site, YourMoneybyDesign.com


  1. Eunice

    I guess I treat my stockpicks differently from my mutual fund investments. Mutual fund investments I question when they perform below the index for a significant amount of time. The odd dip is fine as as the good ones generally outperform the index the rest of the time.

    Stockpicks however, I treat strictly as legitimized gambling. The same rules apply: I never put anything into an individual stock I can’t afford to lose, I set a target of how much gains I want and sell when I get there. Only thing is I do chase my losses if I still think it’s a solid company. Otherwise you never end up buying low. If you buy when things are rosy and everyone’s flush with cash, you’re buying high. If you sell when everyone’s panicking & the economy’s in the toilet then you’re selling low. It’s very counter intuitive to make a buy decision when you see your portfolio shrinking, but if the investment’s solid, then you have to go for it.

    So I guess the short answer is I get disappointed when my stocks go down, but I treat it like a bad hand and don’t lose sleep. It’s like a variable rate mortgage: if you don’t have the stomach for the times when it’ll cost ya, then don’t play.


    nancyzimmerman Reply:

    Tx for popping by, Eunice! It’s interesting: You and I are almost reverse! I no longer use mutual funds except some in LIRAs, but I am “harder” on them than I am my personal stock choices. I think it’s because I can usually assess my stock choices, ie., I know the company and can assess if something has gone fundamentally wrong with it or not. If it hasn’t, dips don’t bother me. In contrast, I’m not 100% certain about what goes on with my mutual funds (in fact, generally, I find them cumbersome to figure out re: what companies are currently in them or out of them) so I get more antsy when they take a dip.


    Aug 11, 2010
  2. Mark

    Regarding the decision of when to sell or if one should if you are worried if your stock is going to dive, is a complicated one. For me it would depend on several things. Bear in mind I come from a technical analyses background so my answers may not jive with you who comes from a fundamental background.

    One thing you could do if you are comfortable with options is to buy a put at a strike price near the current price of the stock. This is like buying insurance on the stock. So if the price of the stock starts to dive, the value of the put increases, offsetting the loss in value of the stock. If you wanted to get fancy, you could sell a call at a strike price above the current stock price to help pay for the put.

    Anything to look at is to consider the price movement as a struggle between the bears (those who are selling and driving the price down) and the bulls (those who are buying the stock and putting upward pressure) on the stock. Then try to get a feel who the bears are – institutional investors (ie. banks, pension funds etc.) These groups buy and sell in HUGE volumes, and when they dump a stock, they put very large downward pressure on the stock. If you sense that these groups are about to dump the stock, GET OUT!!! The stock will go way down. I think you can find out on the web who is selling. Also look at the technicals that the institutional investors often use – the 50 day and 200 moving average. When the 50 day moving average crosses below the 200 day moving average, institutional investors are likely to bail.

    Also look at the VIX. The VIX is a measure of the volatility in the market and is an indication of the “fear” in the market. If the VIX is rising steadily it might be a good idea just to bail a dn sit on the sidelines and wait for things to calm down. I know that some people will get out when the VIX rises above the 30.

    Also look at the price pattern. Is there firm level of support, a price level that the stock has consistently bounced off of and not plunge through. If the stock has broken down below the support level, it would be wise to bail.

    Bear in mind the purpose of technical analyses is a way – imperfect as it is – to look at the psychology of the market and it takes time and skill to interpret the market to your advantage.

    From a fundamental point of view, look at the financials. Are the sales going down. Is the debt level rising. etc. Has there been any news that has been dentrimental to the performance of the stock, like the CEO coming down with dementia, or a competitor coming up with a break through product.

    I could go on and on! As you see you can come down with analyses paralyses!!!!!


    nancyzimmerman Reply:

    Mark – holy smokes! When did you learn all that? Sheesh – and here I thought I was doing well by knowing how to read financial statements of the companies I own.
    That was great info re: clues indicating institutional investors are going to bail. And it also reminds me of a former factor I’d look for in a stock – I’d try to buy little companies that weren’t yet on the radar, or were simply to small, for institutions to purchase. For example, SunRype did me really well.
    Anyway, thanks for your thoughts and I’ll spend some time with my investor’s dictionary! You’re opening a new world to me (ie. technical)


    Aug 14, 2010

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