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Portfolio Overactivity can Backfire

Portfolio Overactivity can Backfire

June 27, 2019

Sometimes human nature tricks us into doing things with our investments that end up causing us harm.

Emotions are part of being human. One of the biggest mistakes many of us make when managing our investment portfolio is making decisions based on emotions, often triggered by financial media biases or past performance. Even when you know past performance is not an indicator of future results, emotions can sometimes override rational thinking.

My recommendation is to avoid approaching investments on a short-term basis. Short-term speculation can be harmful to the value of your portfolio and expensive, depending on trading costs including commissions.

A key to success with investing is to do things that are within your control.

You don’t control when the stock market will increase in value or have a sudden decline. You don’t control when a specific stock will increase or decrease in value based on investor demand to purchase that stock.

There are, however, many things that are in your control that you can and should do.

Make investments that provide you comfort. This will be based on your personal preferences and sensitivities regarding the amount of diversification you want in order to spread investment risk.

Diversification can help balance the ups and downs of individual investments. You can also be proactive by understanding the fees you are paying and determine if they are fair.

Develop a sense of discipline. Common sense investing can often be derailed because of noise that comes from the financial media. We are bombarded with information that many mistakenly think will help guide them to achieving superior returns.

Intelligent investing done for the long-term is the best approach. Sometimes the best thing you can do with your investment portfolio is nothing at all.



Peter Watson is an agent of, and securities products are provided by, Aligned Capital Partners Inc. (ACPI).  ACPI is a member of the Investment Industry Regulatory Organization of Canada (IIROC) and the Canadian Investor Protection Fund (CIPF).  The opinions expressed are those of the author and not necessarily those of ACPI. Peter Watson provides wealth management services through Peter Watson Investments