How would you feel about your investment portfolio if you went to sleep at the beginning of the year and woke-up on Friday? What if you stuck your portfolio in a drawer and pulled it out after three months or a year to look at performance? My guess you would say you were happy and comfortable with your investment decisions, yet there has been a lot of investor anxiety this month.
The recent sell-off is vivid in our minds. Many have compared this event with some of their worst investment months in their lives, yet over a longer timeframe the events of February may not matter. Our investment anxiety should be proportional to the rebalancing period we use and the time horizon of the investment. We are not saying that the repricing of risk should be ignored but rather it should be placed in the context of portfolio objectives, past performance, and investment horizons.