April 15, 2016

Better stock portfolio analysis for long-term self-investors

Most, if not all, stock portfolio apps and services display the gains and losses of your stocks. This information might be useful at times when you analyze your past mistakes to get better; something you should do from time to time.

However, most of the time, you’re doing something else: You’re looking at your portfolio to find information for which stocks to keep and which stocks to sell. For that purpose, the gains and losses in your portfolio send dangerous signals. Intuitively, humans interpret losses as something bad and gains as something good.

This means your "gut feel" can betray you: It might tell you that stocks which lost in value are bad and stocks which gained in value are good. This is not correct. When deciding what to sell and what to keep, these signals are dangerous.

For investors, it doesn’t matter what the stock did in the past, it only matters what it will do in the future. As a matter of fact, a stock with a lower price is more likely to appreciate in value than a stock with a higher price. Since a short-term loss in a stock leads to a lower price, your stocks with losses might be the ones to keep and the stocks with price increases might be the ones to sell. So only looking at stock price movements in your portfolio is dangerous.

The question then is, what should you look at if not the prices in your portfolio? To use the best signals, only look at the information you use to buy stocks. For investors that use Obermatt ranks as a source of investment ideas, this means, only look at the Obermatt ranks in your portfolio. This video illustrates how this is done. You can copy a Google Sheet template that you can use to display the Obermatt ranks in your portfolio.

In this Google sheet, you can enter your portfolio and look up its Obermatt stock ranks automatically. To get the latest Obermatt ranks, subscribe to the free Obermatt investment alert and you will receive a link to a file with the most recent ranks in your mailbox every week.

Import this file to your Google sheet on the second page and - voila - you have the latest ranks of your portfolio.

If it’s all green, don’t worry. If some stocks are red, take a closer look and decide if you want to sell or keep them based on your other information that you typically use to buy stocks.

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