Relax. By living your life and not bothering with the market’s and your portfolio’s daily gyrations, you’re not missing out on any strike-it-rich trade that would dramatically improve your retirement standard of living. In fact, according to a recent study from my performance auditing firm, you might instead be saving yourself from huge losses.
This week’s column is a continuation of last week’s theme, in which I countered the fear of missing out, or FOMO, that many retirees feel about alternative investments such as hedge funds, private equity, and so forth. This new study shows that we should also counter FOMO when it comes to the frequent trading of non-alternative investments such as stocks and bonds. Any time is a good occasion in which to remind you that overtrading can be hazardous to your wealth. But it’s especially important in a bear market, such as this year’s, since many who otherwise recognize that frequent trading is a bad idea nevertheless believe that an exception should be made when the market’s major trend is down. This study challenges that belief. The study calculated, for each newsletter portfolio that my auditing firm monitors, whether it today is ahead or behind where it would have been had it been frozen into place at the beginning of the year. Only if the actual portfolio is ahea …