Latest / How Canadian Markets Work / Episode 97: Measuring Performance (The Timing Mismatch)

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Episode 97: Measuring Performance (The Timing Mismatch) · How Canadian Markets Work

• 0:00
  Now that you've established your portfolio management
• 0:02
  process and locked in your investment policy
• 0:04
  statement from our last discussion, it's time
• 0:07
  to connect that blueprint to the reality of measuring
• 0:10
  performance. Specifically, why the personal money
• 0:14
  -weighted return of your own money can differ
• 0:16
  dramatically from a fund's loudly published time
• 0:19
  -weighted return. Yeah, that difference is, um...
• 0:22
  It's usually a pretty harsh realization for a
• 0:25
  lot of investors Oh, absolutely because you know
• 0:28
  you can build this perfect portfolio But the
• 0:31
  second you try to actually measure if you're
• 0:32
  making money You realize the financial industry
• 0:35
  speaks like a completely different language than
• 0:37
  your bank account, right? I mean you look at
• 0:39
  this glossy marketing brochure, right? It shows
• 0:42
  this pristine Upward trending chart and then
• 0:45
  you look at your own account statement and the
• 0:47
  two numbers just they seem totally irreconcilable
• 0:49
  It honestly feels like someone is lying to you.
• 0:52
  It really does but in reality You've just sort
• 0:54
  of stumbled into this massive blind spot in how
• 0:57
  the financial industry calculates and reports
• 0:59
  success So today our mission for this deep dive
• 1:03
  is to like really tear apart the math of investment
• 1:06
  returns figure out how to pick a benchmark that
• 1:09
  doesn't lie to you and unpack why the only performance
• 1:12
  number that actually matters is what's left after
• 1:15
  fees, taxes, and inflation. Yeah, the real bottom
• 1:18
  line. Exactly. So let's dissect the mechanics
• 1:20
  of that blind spot right off the bat, because
• 1:22
  our sources highlight this classic sequence of
• 1:25
  returns trap that happens, I mean, constantly.
• 1:28
  Oh, all the time. Consider this scenario from
• 1:30
  the sources. Over a two -year period, Right?
• 1:33
  A specific fund is up 17%. Okay, sounds great.
• 1:37
  Right. But an investor in that exact same fund
• 1:39
  over that exact same two -year period is down
• 1:42
  7 .3%. Yeah, it's wild. No hidden fees, no fraud,
• 1:46
  no weird accounting errors. Down 7 .3. Let's
• 1:50
  just speed through the math on this because anyone
• 1:52
  who has ever tried to time the market knows this
• 1:55
  pain intimately. Oh, yeah. The math behind this
• 1:58
  is really the key to understanding the entire
• 2:00
  industry. So say you put $10 ,000 into this fund
• 2:03
  in year one. The fund spikes 30%. Meeting your
• 2:07
  10 grand is now 13 grand. You're feeling pretty
• 2:10
  good. You feel like an absolute genius. Like
• 2:12
  you decide you can't miss out on this, so you
• 2:14
  back up the truck and dump in another $90 ,000.
• 2:17
  Right, because of course you do. Exactly. So
• 2:20
  now that brings your total exposed balance to
• 2:22
  $103 ,000. OK, so you're heavily invested now.
• 2:26
  Very. Then year two hits, and the fund drops
• 2:30
  10%. Ouch. Yeah. Your balance falls by $10 ,300,
• 2:35
  which leaves you with roughly $92 ,700. And right
• 2:38
  there, that's where the massive disconnect happens.
• 2:41
  Because I put in 100 grand total. Yeah. 10 initially,
• 2:44
  then 90. Exactly. You contributed a total of
• 2:47
  $100 ,000 in cash, and you are walking away with
• 2:50
  $92 ,700. You physically lost money. Right. But
• 2:54
  the fund manager. Well, the fund manager just
• 2:57
  looks at the underlying asset performance. So
• 2:59
  they see a 30 % gain followed by a 10 % loss.
• 3:03
  Geometrically compounded that manager correctly
• 3:06
  and, you know, entirely legally reports an annualized
• 3:09
  two -year return of roughly 17%. That is just
• 3:12
  mind -bending. I am sitting on this massive net
• 3:15
  cash loss of 7 .3 % while my fund manager gets
• 3:20
  to print a brochure bragging about a 17 % gain.
• 3:25
  Yeah. the gap is massive because your heavy capital,
• 3:28
  that 90 grand, was only exposed to the downside.
• 3:31
  Right. I missed the whole 30 % run -up with the
• 3:34
  big money. Exactly. And this illustrates the
• 3:37
  fundamental divide in performance measurement.
• 3:39
  See, the fund is reporting what's called a time
• 3:41
  -weighted return. Okay. Time waited. Right. This
• 3:44
  calculation deliberately strips out the impact
• 3:47
  of cash flowing in and out. It basically operates
• 3:49
  on this hypothetical scenario of, you know, if
• 3:52
  a single dollar had been invested on day one
• 3:54
  and left completely alone, what would it have
• 3:56
  done? So it's basically grading the manager in
• 3:58
  a vacuum. Exactly. It measures the skill of the
• 4:00
  manager entirely independent of client behavior.
• 4:03
  Which, I mean, I guess that makes sense from
• 4:04
  the manager's perspective. They have absolutely
• 4:07
  no control over when I decide to panic sell or
• 4:10
  greed buy. Right. I can't control your mouse
• 4:12
  clicks. Right. So they shouldn't be penalized
• 4:14
  because I decided to, you know, dump 90 grand
• 4:17
  in at the exact peak of a market cycle. No, they
• 4:20
  shouldn't. Honestly, it is the only equitable
• 4:23
  way to compare two different portfolio managers
• 4:26
  against one another. Because their clients might
• 4:28
  behave totally differently. Exactly. If Manager
• 4:30
  A happens to have clients who always buy at the
• 4:32
  top and Manager B has clients who happen to just
• 4:35
  hold steady, evaluating their actual stock picking
• 4:38
  skill requires isolating the portfolio's internal
• 4:41
  performance from all that external cash flow
• 4:44
  timing. OK, that makes sense for them. But relying
• 4:47
  on that time -weighted return, to judge my own
• 4:50
  success is completely delusional. Oh, completely.
• 4:53
  You're like, OK, let's unpack this. It's like
• 4:54
  a restaurant getting a five star review for an
• 4:56
  amazing appetizer, right? But you showed up late,
• 5:00
  only got served the burnt dessert, and the chef
• 5:03
  is still expecting you to congratulate them on
• 5:05
  a flawless five star meal. That is a perfect
• 5:07
  analogy. The burnt dessert. was exactly where
• 5:11
  you had the bulk of your capital exposed. I ate
• 5:13
  the whole burnt cake. You really did. And this
• 5:15
  is why for individuals, we have to use a money
• 5:19
  weighted return, which is also called the internal
• 5:22
  rate of return, to measure what your money actually
• 5:25
  did. Money weighted. Right. Money weighted returns
• 5:28
  factor in the exact size and timing of every
• 5:30
  single deposit and withdrawal. So it weights
• 5:33
  the performance by the amount of capital that
• 5:35
  was physically in the market during any given
• 5:37
  period. OK, so that naturally begs the question
• 5:40
  of why we do this to ourselves. Investors are
• 5:44
  already naturally inclined to chase performance,
• 5:46
  right? Jumping in after a big gain, selling after
• 5:49
  a loss. Yes, human nature 101. But what makes
• 5:52
  it worse is that the industry exploits this behavior.
• 5:55
  By putting those absolute most flattering time
• 6:00
  -weighted numbers front and center. Yeah, absolutely
• 6:02
  do. Like the math shows the gap, but it's really
• 6:04
  human psychology that causes the destruction
• 6:07
  of the capital in the first place. Yeah, because
• 6:09
  we inherently extrapolate short -term outcomes
• 6:12
  into permanent trends. It's classic recency bias.
• 6:15
  Right. When you saw that 30 % gain on your initial
• 6:18
  $10 ,000, your brain immediately assumed that,
• 6:21
  well, 30 % was a feature of the fund, not just
• 6:24
  a temporary fluctuation. I thought I found the
• 6:26
  golden ticket. Exactly. Chasing last year's winner
• 6:30
  is honestly one of the most exhaustively documented
• 6:33
  ways retail investors bleed their own portfolios
• 6:35
  dry. It's just wild. I mean, past performance
• 6:38
  isn't just a weak predictor of future results.
• 6:41
  In a lot of cyclical markets, a massive run up
• 6:44
  is actually a pretty strong predictor of a near
• 6:47
  term correction. Which circles us back perfectly
• 6:49
  to the investment policy statement, the IPS that
• 6:52
  we established in our previous deep dive. Yes,
• 6:54
  the IPS. We talked about it like like it was
• 6:57
  this strategic blueprint. But in the context
• 6:59
  of these money -weighted disasters, the FPS is
• 7:02
  really like a behavioral straight jacket. That
• 7:05
  is exactly what it is. Because it dictates your
• 7:07
  asset allocation and your contribution schedule
• 7:09
  in advance, right? So you don't let a sudden
• 7:12
  30 % market spike. goad you into dumping your
• 7:16
  life savings in at the top. Right. The IPS essentially
• 7:19
  removes your own discretion in those moments
• 7:22
  of high emotion. Your cash flows should be determined
• 7:25
  by your savings rate and your long -term financial
• 7:27
  goals, never by whatever the market happens to
• 7:30
  be doing that specific week. Makes sense. And
• 7:33
  if you automate your contributions, your money
• 7:35
  -weighted return will still differ from the fund's
• 7:38
  time -weighted return, sure. Right. The math
• 7:40
  is still different. But over a 30 -year horizon,
• 7:43
  consistent dollar cost averaging usually brings
• 7:46
  those two numbers relatively close together.
• 7:48
  It really smooths out the sequence of returns.
• 7:51
  So what does this all mean for the statements
• 7:53
  you receive in the mail? I get these annual statements
• 7:56
  or I'd log into my brokerage app. Are the personal
• 7:59
  rates of return printed on my actual account
• 8:02
  statements money -weighted or am I being flattered
• 8:04
  by the brokerage with that time -weighted number
• 8:06
  just to keep me happy? That's a great question.
• 8:09
  Regulatory environments do vary around the world,
• 8:12
  but in many strict jurisdictions, like Canada,
• 8:15
  for instance, they implemented CRM2 regulations
• 8:19
  specifically for this reason. Oh, really? Yeah.
• 8:22
  Under those rules, your personal statement is
• 8:24
  legally required to show the honest money -weighted
• 8:27
  return. Well, that is a rare win for transparency.
• 8:30
  It really is. The honest number is usually sitting
• 8:32
  right there on your statement. The problem isn't
• 8:35
  necessarily that brokerage are hiding it. The
• 8:38
  problem is that investors just don't understand
• 8:40
  why their personal statement says they made,
• 8:42
  say, 5 % when the mutual fund's public website
• 8:46
  says the fund made 12. Oh, I see. They assume
• 8:49
  there's this massive hidden fee or a clerical
• 8:51
  error rather than recognizing it's just the cost
• 8:54
  of their own cash flow timing. That is fascinating.
• 8:57
  OK, let's pivot a bit to the next trap because
• 8:58
  this is huge. Yeah. Once you find that honest
• 9:00
  money weighted return, you need to know if it's
• 9:02
  actually any good. Right, you need context. A
• 9:05
  7 % gain feels great in a vacuum, but if the
• 9:08
  broader market went up 20%, I left a lot of money
• 9:11
  on the table. And here's where I see investors
• 9:14
  playing these incredibly aggressive mind games
• 9:16
  with themselves. Oh, grading on a curve. Exactly.
• 9:19
  They cherry pick whatever benchmark makes them
• 9:22
  look like a financial genius. Yeah, benchmark
• 9:24
  selection is basically ground zero for self -deception.
• 9:28
  Human nature just craves validation, so investors
• 9:30
  will invariably dig around to find some index
• 9:33
  that underperformed their portfolio and just
• 9:35
  declare victory. But a benchmark is only valid
• 9:38
  if it accurately reflects the risk and the asset
• 9:40
  allocation you actually hold. Right. So if I
• 9:44
  have a 60 -40 portfolio like, 60 % global equities,
• 9:48
  40 % bonds, and I compare my performance to the
• 9:51
  S &P 500 during this massive tech bull market.
• 9:53
  You're going to be miserable. Exactly. I'm setting
• 9:55
  myself up for misery because I'm going to vastly
• 9:57
  underperform the S &P 500. But that comparison
• 10:00
  is entirely useless. I intentionally bought the
• 10:04
  bonds to dampen volatility. Exactly. Comparing
• 10:07
  a conservative, balanced 60 -40 portfolio to
• 10:11
  a pure equity index is... Well, it's like complaining
• 10:15
  your minivan didn't win a Formula One race. Right.
• 10:17
  You didn't buy it to go 200 miles an hour. You
• 10:19
  bought it to safely get your kids to school.
• 10:22
  You accepted lower long -term returns in exchange
• 10:24
  for a smoother ride. So you cannot grade your
• 10:27
  portfolio against an index that took on all the
• 10:30
  violent volatility you explicitly paid a premium
• 10:33
  to avoid. OK, I love that minivan analogy. So
• 10:36
  my benchmark has to be a blended mirror of my
• 10:38
  actual holdings. Exactly. 60 % global stock index,
• 10:42
  40 % aggregate bond index. I need to grade the
• 10:45
  minivan on how well it handles groceries, not
• 10:48
  how fast it takes a corner on a track. Precisely.
• 10:51
  But here's the thing. Even when investors actually
• 10:53
  pick the right blended asset class, they routinely
• 10:56
  fall into this much more subtle benchmarking
• 10:58
  trap involving how the index itself is calculated.
• 11:01
  Uh oh. What's the trap? You have to ensure you
• 11:04
  are comparing your portfolio to a total return
• 11:06
  index, not a price return index. Wait, wait.
• 11:09
  I know exactly where this is going. People look
• 11:11
  at the Dow Jones or the S &P 500 ticking across
• 11:13
  the bottom of the screen on the nightly financial
• 11:15
  news, right? Yeah. But those tickers completely
• 11:18
  ignore dividends. They only track the raw share
• 11:22
  price. Bingo. They are purely measuring capital
• 11:26
  appreciation. When a company pays a dividend,
• 11:30
  cash physically leaves the company's balance
• 11:32
  sheet and goes to the shareholders, which technically
• 11:35
  drops the share price by the exact amount of
• 11:37
  the dividend. A price return index treats that
• 11:40
  payout as a drop in value, completely ignoring
• 11:43
  the fact that the investor just received cold,
• 11:45
  hard cash. A total return index, on the other
• 11:48
  hand, assumes every single dividend paid is immediately
• 11:51
  reinvested back into the market. Which is how
• 11:53
  most people actually invest through mutual funds
• 11:55
  or ETFs anyway, right? automatic dividend reinvestment
• 11:58
  turned on by default. Exactly. So if I pull up
• 12:01
  my portfolio's performance, which naturally includes
• 12:03
  all those reinvested dividends over the year,
• 12:06
  and I compare it to the price return index on
• 12:08
  the news, I'm cheating. You are artificially
• 12:11
  flattering yourself big time. You're measuring
• 12:14
  your fully functioning portfolio against a benchmark
• 12:17
  that basically has had one of its primary engines
• 12:20
  just turned off. That's crazy. And the scale
• 12:23
  of this engine is staggering. If you look at
• 12:26
  the S &P 500 over a long historical horizon,
• 12:29
  say the last 50 to 80 years, reinvested dividends
• 12:33
  and their subsequent compounding account for
• 12:35
  upwards of 70 % of the total return. Wait, 70
• 12:39
  %? 70%. So capital appreciation, the literal
• 12:42
  thing everyone obsesses over on the SOC charts,
• 12:45
  is only a fraction of the actual wealth generated
• 12:47
  over a lifetime. Over long time horizons, yes.
• 12:50
  It's the compounding. Dividends by more shares,
• 12:52
  which pay more dividends, which buy more shares.
• 12:54
  Right. It is the ultimate compounding machine.
• 12:57
  So if you benchmark your total performance against
• 12:59
  a price index that strips out 70 % of historical
• 13:03
  wealth generation, it becomes absurdly easy to
• 13:05
  convince yourself you're some sort of investing
• 13:07
  prodigy beating the market. Note to self, always
• 13:10
  look for the letters. TR for total return on
• 13:13
  any chart I pull up. Okay, so let's say I run
• 13:16
  this gauntlet perfectly. I automated my cash
• 13:18
  flows, so my money -weighted return is honest
• 13:21
  and solid. I didn't chase performance. I picked
• 13:23
  a blended total return benchmark that matches
• 13:26
  my exact risk profile, and I actually beat it
• 13:29
  by a percent. Sounds amazing! Right. I'm holding
• 13:33
  the trophy. I should feel incredibly wealthy.
• 13:35
  Well... You hold an intermediate trophy. Oh,
• 13:38
  come on. I know, I know. Beating a benchmark
• 13:41
  on paper is intellectually satisfying, but that
• 13:44
  published nominal return is far from the final
• 13:46
  score. The true measure of wealth isn't the number
• 13:50
  on the screen. It's what that number can actually
• 13:53
  do in the real world. Right, purchasing power.
• 13:56
  Exactly. We have to subject that nominal return
• 13:59
  to the silent killers of purchasing power. Fees,
• 14:02
  taxes, and inflation. OK, let's walk through
• 14:04
  this meat grinder. We start with the nominal
• 14:06
  returns. Say I made 10 % this year. OK, first
• 14:09
  up are the fees, the management expense ratio,
• 14:11
  the trading commissions, the bid ask spreads.
• 14:14
  These are often deducted internally from the
• 14:17
  fund's assets, meaning you don't even get a bill
• 14:19
  in the mail for them. They silently drag your
• 14:21
  gross 10 % down to, say, 8 .5%. So it's out of
• 14:26
  sight, out of mind, but my capital is definitely
• 14:28
  still shrinking. OK, next up. Taxes. Assuming
• 14:33
  this money isn't sheltered in a retirement account,
• 14:35
  the tax authority wants its cut of my 8 .5%.
• 14:39
  Right. And this is where the mechanics get highly
• 14:41
  specific. Different types of returns face drastically
• 14:45
  different tax treatments. Interest from bonds,
• 14:48
  for example, is usually taxed at your highest
• 14:49
  marginal income rate. It is brutally inefficient.
• 14:53
  Capital gains might be taxed at half that rate,
• 14:55
  and eligible dividends might get a tax credit.
• 14:59
  But regardless of the exact composition, a taxable
• 15:01
  account is basically a leaky bucket. So let's
• 15:03
  say taxes shave off another 2 .5%. OK, so my
• 15:07
  10 % nominal return is now sitting at 6 % after
• 15:10
  fees and taxes. But then we hit the final boss.
• 15:14
  inflation, the actual depreciation of the currency
• 15:17
  itself. If inflation is running at let's say
• 15:20
  4%, I subtract that from my 6%, leaving me with
• 15:24
  2%. That 2 % is your real after -tax, after -fee
• 15:28
  return. Wow. That is the actual physical increase
• 15:31
  in your purchasing power. Your nominal account
• 15:33
  balance looks 10 % larger. But your actual ability
• 15:37
  to buy groceries real estate and fuel only increased
• 15:40
  by 2 % Okay, here's where it gets really interesting
• 15:42
  and I have to push back here. Sure Are you saying
• 15:45
  I could have a year? Where my portfolio physically
• 15:49
  goes up I pay taxes on those gains and yet because
• 15:52
  of inflation my actual purchasing power is negative
• 15:55
  Like, I can make money and still get poorer.
• 15:58
  Yes, absolutely. But like, I can't control inflation.
• 16:01
  I can't vote away the tax code by myself. Right.
• 16:03
  Isn't obsessing over this true bottom line just
• 16:06
  a recipe for a severe investor depression? It
• 16:09
  can feel that way. How does knowing this actually
• 16:11
  change my day -to -day strategy? Because I can't
• 16:13
  fix the macroeconomic environment. Well, no,
• 16:16
  you can't control inflation, but understanding
• 16:18
  its mechanics dictates your asset allocation.
• 16:21
  Think of the nominal illusion of the 1980s. OK,
• 16:24
  what happened then? You could buy a certificate
• 16:26
  of deposit, a CD, at a bank yielding 10%. Investors
• 16:31
  felt incredibly wealthy getting double -digit
• 16:33
  guaranteed yields. 10 % guaranteed sounds amazing.
• 16:36
  Right. But inflation was running at 12%. Oh,
• 16:39
  wow. They were locking in a guaranteed loss of
• 16:42
  2 % in purchasing power every single day. year
• 16:45
  while simultaneously paying taxes on the 10 %
• 16:48
  phantom gain. That is brutal. It is. If you don't
• 16:52
  obsess over the true bottom line, you will mistakenly
• 16:54
  seek safety in cash or bonds during high inflation
• 16:57
  environments, which effectively guarantees your
• 16:59
  own impoverishment. Okay, so knowing this prevents
• 17:02
  me from chasing the illusion of safety. Exactly.
• 17:05
  Furthermore, while you can't control the tax
• 17:07
  code, you can control asset location. Location,
• 17:10
  right. When you understand how brutally inefficient
• 17:13
  bond interest is compared to capital gains, you
• 17:16
  strategically place your fixed income assets
• 17:18
  inside tax -sheltered retirement accounts. Ah,
• 17:21
  to shield the inefficient stuff. Yes. And you
• 17:25
  hold your high -growth, tax -efficient equities
• 17:27
  in your taxable accounts. You can easily claw
• 17:30
  back one or two percentage points a year just
• 17:32
  through structural tax efficiency without taking
• 17:34
  on a single ounce of additional market risk.
• 17:37
  That makes total sense. We are basically just
• 17:39
  clawing back margin wherever we have agency because
• 17:43
  the macro environment is going to take its cut
• 17:44
  regardless. Precisely. And this brings us to
• 17:47
  the final element of performance measurement,
• 17:50
  risk adjusted returns. Because the psychological
• 17:52
  burden of holding these assets is honestly just
• 17:55
  as real as the tax burden. OK, walk me through
• 17:58
  risk adjusted returns. Because intuitively, Making
• 18:02
  12 % always sounds better than making 10%. It
• 18:04
  sounds better until you experience the actual
• 18:06
  path taken to get there. Volatility isn't merely
• 18:10
  a mathematical variance. It is a behavioral acid
• 18:13
  test. A behavioral acid test, I like that. A
• 18:15
  portfolio that returns 12 % but routinely subjects
• 18:18
  you to massive 30 % gut -wrenching swings isn't
• 18:22
  inherently superior to a portfolio returning
• 18:24
  10 % smoothly. Because the mathematical probability
• 18:27
  of me panic -selling during a 30 % drop is like
• 18:31
  exponentially higher. Exactly. The risk that
• 18:34
  matters most is the risk of abandoning your strategy.
• 18:37
  Right. If that high octane 12 percent portfolio
• 18:40
  drops by a third in a single month, you might
• 18:43
  capitulate, sell at the absolute bottom, and
• 18:46
  lock in a permanent loss of capital. And if you
• 18:49
  do that, your time -weighted, your money -weighted,
• 18:52
  and your real returns all plummet to negative
• 18:55
  numbers simply because you couldn't stomach the
• 18:57
  ride. So a slightly lower absolute return can
• 19:00
  actually be vastly superior if it just buys me
• 19:03
  the behavioral smoothness required to sit on
• 19:05
  my hands and stay invested for three decades.
• 19:08
  Yes. The 10 % I can stick with is infinitely
• 19:10
  better than the 12 % that makes me bail. Exactly.
• 19:13
  Performance isn't just about maximizing the upside.
• 19:16
  It is about maximizing the probability that you
• 19:18
  will actually achieve your long term financial
• 19:20
  goals without sabotaging yourself along the way.
• 19:24
  This has been such a massive reality check on
• 19:26
  how we interact with our own money. Let's do
• 19:28
  rapid fire recap for you the listener to lock
• 19:31
  down these concepts. Let's do it. First. Time
• 19:34
  -weighted return judges the manager by ignoring
• 19:36
  cash flows. Money -weighted return judges your
• 19:39
  actual wealth by factoring in the exact timing
• 19:42
  of your deposits and withdrawals. Second, always
• 19:44
  grade yourself against a blended benchmark that
• 19:47
  matches your specific asset allocation. And crucially,
• 19:51
  ensure it is a total return index that captures
• 19:53
  reinvested dividends. Otherwise, you're comparing
• 19:55
  your reality to a fundamentally broken yardstick.
• 19:58
  Right. And finally, a nominal return is just
• 20:01
  Vanity. The only metric that actually matters
• 20:04
  to your real -world life is what is left after
• 20:06
  management fees, the tax authority, and inflation
• 20:09
  have all taken their cut. Maximizing purchasing
• 20:12
  power is the only true objective. Exactly. Protect
• 20:15
  your purchasing power and place your assets efficiently
• 20:17
  to minimize the drag. But I want to leave you
• 20:20
  with one final thought to chew on that goes beyond
• 20:23
  just the math we've covered today. This is a
• 20:25
  good one. We've talked extensively about how
• 20:27
  your behavioral reaction to volatility can destroy
• 20:29
  your money -weighted returns. But think about
• 20:32
  the sheer frequency with which you check your
• 20:34
  portfolio app on your phone. Yeah, that daily
• 20:36
  check. If you check your balance every single
• 20:39
  day, you are psychologically forcing yourself
• 20:42
  to experience 365 distinct, isolated moments
• 20:47
  of volatility a year. Which is exhausting. It
• 20:50
  is. The stock market is essentially a coin flip
• 20:52
  on a daily basis. Are you artificially inflating
• 20:55
  your own perception of risk and increasing the
• 20:58
  odds of an emotional mistake simply by overmeasuring
• 21:01
  it? That's a huge point. Sometimes the most effective
• 21:03
  strategy for boosting your long -term risk adjuster
• 21:06
  performance is to simply delete the app and let
• 21:08
  the match work in silence. Thanks for joining
• 21:11
  us on this deep dive into the true nature of
• 21:13
  investment performance. We'll catch you on the
• 21:14
  next one.