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How do short-term events affect your portfolio? Should you be reading general market news, financial articles, analyst reviews, and quarterly earnings? Should an investor follow price fluctuations? What is the real impact of all of this on your portfolio?

That’s what we’re going to cover in this episode, along with a few tips on how to check your portfolio out over the summer!

You will learn

  • How short-term events don’t really affect your ROI.
  • Why not read too many articles on the same subject?
  • How the Pareto principle can be used in your investment decisions.
  • Should an investor take action in the event of price fluctuations? And is there a difference in the action to be taken depending on the length of the trend observed (daily, monthly, yearly)?
  • What is insider trading and how do you react to it?
  • How valuable are quarterly and annual results reports.
  • The five tips Mike uses to review his portfolio over the summer.

Related content

The information matrix

Any information obtained from a reliable source is good information. I’m not here to tell you to stop reading Seeking Alpha or The Globe Investor. I’m here to help you understand the difference between information that can help you make good investment decisions and information that can paralyze you in Analysis mode.

The noise of the stock market will raise doubts in your head. Later, these doubts could lead to anxiety or even poor investment decisions. For most of us, the best move in March 2020 was not doing anything at all. The noise starts when you receive too much information or consume it at the wrong moment (or for the wrong purpose). So I decided to classify information types into a matrix.

Information typepurposeA hit action
General market news: general information about the market, economy or company. We talk about what is affecting the stock market this week.This information travels fast and becomes out of date quickly. The only purpose is to satisfy your curiosity about what is happening today.In the short term, mostly noise.Keep this type of information to a minimum. Read some headlines and ignore most of the articles.
Financial Articles: This can be the stock market, a specific company, an investment strategy, or macroeconomic views.This information gives you a perspective on a specific topic. You can find out about a new investment method or company.Short-term to long-term. Could be a lot of noise. It’s powerful information in small amounts with targeted topics.Read macro articles monthly to get a good overview of the economy and the stock market. The DSR newsletter could be a wise choice here. Only read articles on companies when doing your research.
Exchange rate fluctuation: How a stock price has moved through the day, week, month, year.Get an idea when you are losing or making money.In the short term, mostly noise.Don’t do anything unless your investment thesis changes. Exchange rate fluctuations are part of the game, learn to live with them.
Analyst Reviews and Updates: Financial companies provide ratings and comments on the economy or specific companies.This information validates or invalidates your perspective. You will know whether a company thinks your stake is a buy or a sale.This could have a short-term impact on the stock. Typically, the stock can go up or down a few% on the day the information is released. This is a short term effect.Ignore it completely. Financial analysts do not manage your portfolio or follow the same investment strategy as you. Your mind is likely to be dismantled by a competitive company.
Insider trading: The law requires insiders (such as the CEO or CFO) to report their buying and selling transactions.This information is available to show transparency and avoid insider trading. Remember that you do not share management’s investment goals and financial situation.This could have short-term implications (think of the impact on gold stocks when Buffett announced his $ 500 million purchase of ABX stocks). It has no long-term effects.Ignore it completely. What if the CEO sells stocks because he wants to buy a villa? Would you go about his trade without knowing why he was selling?
Quarterly / annual income: Management discloses its earnings results in a press release, an investor presentation and annual financial statements.This will give you a clear picture of how the company has done financially. Management will usually discuss their results and explain the growth or decline in the numbers.This can have both short and long term effects on your portfolio. Don’t overreact to surprising results (both good and bad). Let the information move in before making any trades.You saw it coming; this is the most important thing to read! Tracking quarterly earnings means keeping an eye on your investment. If there’s only one to read, it’s this one.

I did not want to make an exhaustive list of information. The purpose of this matrix was to help you choose the right type of information (mostly quarterly earnings summaries and financial articles in small doses). Efforts to collect and analyze the information should be made in your research process. I know it is tempting to try to figure out what will happen in 3 months and invest accordingly. But the truth is no one knows and most of the games you might play will not produce the results you expected. Long-term investing in dividend growth is about spending a lot of time understanding the companies you invest in and then doing quarterly tracking to make sure you were right from the start.

At DSR, I make sure we cover that part and do the hard work for you. Our summaries should be more than enough to run your quarterly follow-ups. Trust your investment process and focus on the 20% of your work that will generate 80% of your returns. If the information you read is inconsistent with our investment process, it is likely just noise.

Also, here is a video on the quarterly review of your portfolio that can help you this summer too.

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