Mark to Market Every Day

We couldn’t resist writing a bit on ‘marking your portfolio to market everyday’.

As income investors we are looking to lock in a decent yield while having the maximum safety we can possibly find consistent with our goals.

Certainly there are some income investors that are purely and simply looking to lock down the income flow with little regard for the net asset value of the portfolio, BUT IT IS OUR EXPERIENCE IN 47 YEARS OF INVESTING that MOST investors cringe when their holdings are falling fairly rapidly–we know we do.

The other saying you hear is ‘I don’t lose money until I sell’.  This is pure baloney and an excuse by someone failing to face up to reality–we see this over on Seeking Alpha all the time.  Let’s face it-if you bought at 10 and now it is at 5 you have lost money.  Maybe you will get it back in the long term or maybe you won’t.

The reason we say ‘mark to market each day’ is that if you are not mentally facing your loss you won’t ask the hard questions.  Are the issues I hold as solid as I once believed?  Are my goals correct (maybe one should be all in money markets instead of stocks)?  Do I need my money in the next year or so (if you need it in the next few months it should be in near cash)?  Has anything in the local or global economy changed so much that I should be getting crushed?

Sometimes investors can’t sleep at night–literally can’t sleep–years ago we were that way.  If you can’t sleep because your portfolio is getting crushed you need a higher cash type portion.

For us we absolutely hate that we had an overall loss of maybe 6/10% this week–we hate it.  But in the end the loss is not of real consequence to us, but I don’t deny any losses–they are real.   I guarantee you when we have the news on tonight and they talk about the big DJIA down day and my wife asks how we survived–saying ‘we didn’t lose anything because we didn’t sell’ won’t cut it.


42 thoughts on “Mark to Market Every Day”

  1. Thank you Tim et all for sharing your insights.

    Except for a handful of SA contributors and commentators which includes Preferred Stock Trader and Girdbird (who by mentioning this awesome site in one of his comments helped me find it) SA has become a promotional sell side platform.

    This site is truly a blessing for any conservative retiree. My wife and I retired 2 years ago from a long IT careers. I’ve always invested/traded technology stocks, an area I was very comfortable with. But switching to retirement investments is a whole different ball game. Initially we approached few investment advisors to manage our accounts. After few meetings with mostly 20+ or 30+ something folks, some that didn’t even experience a major down market, we knew we’re better off on our own. I recall and I swear I am not making this up, one fellow was trying to talk us into bitcoin!

    I know I am in the right company here. Thank u all for continuing to share your experiences.

  2. Tim,

    I disagree with your Market to Market Every Day approach. Investors should be thinking long term, out many years for retirement. Almost all investment advisors say to ignore daily price changes. You are suggesting we all become day traders.

    Selling when a security has declined in price can be a very bad idea. In the crash of 2007-2008, people who sold in fear on the way down lost a lot of money. People who held on saw it all come back and much more.

    Today’s fixed income investors have to understand we are in a rising rate environment. Bond prices will go down, that’s guaranteed! A bond buyer must plan to hold to maturity and only sell if the credit quality of the issuer declines significantly.

    1. Andrew, certainly nothing wrong with an opposing viewpoint. In fact I prefer cerebral criticism to any of my picks over group think backslapping. But that being said, and probably reading Tim longer than you have, I dont think you are correctly interpreting his point of view above. And his actions certainly are not constructed in a manner that would.
      His main emphasis is not just shrugging your shoulders and accepting a potential beatdown. Its to be prepared mentally and have a game plan for it.
      In fact I suspect when he replies he wont be in much disagreement with you.

      1. Gridbird, I don’t think you are correctly interpreting Andrew’s comment. I side with his view that “A bond [and preferred] buyer must plan to hold to maturity and only sell if the credit quality of the issuer declines significantly.” The daily obsession with insignificant movements in interest rates and preferred share prices that many of you demonstrate on a daily basis here, is no better than those who guess at movements of common shares. Flipping preferreds for a penny here and a nickel there, is not much of a hobby and it’s really not the right attitude to have. All my opinions of course.

        1. Larry, I agree – most investors, in fact near all investors should not trade in and out of bonds or preferreds. Though there’s always that rare bird who evidences talent at consistently pulling in full dividend and interest distributions 3 to 6 months early. Nothing wrong with always running the ball up the middle, but if your team consistently gains more yards for each possession than the competition, those extra first downs frequently end in a TD.

        2. Actually Larry, I quite agree you…..That is why I bought KTH again Friday. At a 2028 maturity, I am quite fine holding with a 6.3% YTM for quality utility debt…BTW…If you had bought SBNCM at $11 about 6 weeks ago and sold at $14.95 this Friday would you call that pennies? Or just hold and not take the easy cap gain? I dont know why I would hold when I can lock in a nice cap gain. The previous last trade prior was $12…You wouldnt sell with an offer at $14.95? .. Or buying MSEXP earlier this year at $140 and selling at $182 a few weeks later? Its last trade was at $135. So I am better off just to have held to see it worth $135 now? I dont think so…. Not all are penny trades. Before I buy, I always ask myself, am I comfortable holding long term? If I am, I buy. But I know if a stock blips up above its normal trading range, I am not going to just ride it back down…Why do that? That is why I bought KTH at $29.22 a few weeks ago and sold half at $29.70. I knew it would come back down.
          This is just my opinion but doing this is certainly a lot safer than being a blind buy and holder…But my shares of what I own havent been rocked either. I guess it depends on what one owns.

          1. “If you had bought SBNCM at $11 about 6 weeks ago and sold at $14.95 this Friday would you call that pennies?”

            Continued adroit trading by you Grid for sure. In this case though, while I wouldn’t call that pennies either – I would call it “for a few bucks.” SBNCM is beyond thinly traded – zero trades on a regular basis. Virtually impossible to acquire a meaningful block of shares without moving the price in order to “flip” several weeks later. A big win indeed – for a few bucks perhaps.

            1. Dura, I got 800 of them, and yes was lucky to get that many, probably very lucky . ~$3200 quick profit for a pensioner like me is good money, lol. I got it for the 8% yield. I sold 200 a few weeks ago at $15, and then someone offered at $14.95 friday so I felt obligated to let the rest go. That in effect becomes a 6% yield at $14.95 so I was fine selling at that yield as there are other opportunities at plus 6% for me.
              You thought SBNCM was thinly traded try MSEXP that I flipped for $42 a share profit holding a few weeks….Only 780 shares are in existence…I still have a 100. Now that is really thinly traded. It has went 12 years without trading before. Current ask price for one share is now $99,999 ($100 par). I think I will pass on the current ask price. 🙂

        3. Larry, you have to understand that bonds and preferreds are not synonyms. A perpetual preferred does not have a maturity. So that must be accounted for. Additionally, some baby bonds have 50 year maturities. Just buying and holding until maturity that may not come in ones lifetime has to be accounted for.
          I am not advocating my system over any others, I just explain what I do. And if that doesnt suite you that is prefectly fine. One should invest to ones comfort zone. But you are totally trivializing what I do when you refer to pennies. What is a total inaccurate portrayal.

            1. Ah, but Larry, your incorrect assessment did apply to me, so I did reply. Hey its all good Larry. The fact you dont approve of this method doesnt personally offend me in any way. Its a forum of ideas, not a “groupthink” back slapping session…Keep on disagreeing.

    2. Andrew, I certainly am not disagreeing with your general premise, but there definitely are securities that HAVE to be sold to protect one’s portfolio. By “mark to market” we mean to be aware of each of the securities in your portfolio and their price movement. The debt, equity, art, automobile, metals, sports card, stamp, coin markets are a daily voting machine with some wild fluctuations. It is easier to see these price movements in the equity, preferred or debt securities (Grid sit this one out) and not the daily movements of other markets (like real estate). Securities should be sold when one feels that something has changed or your investing goals have transitioned (like working into retirement). This is a very interesting topic and thankfully Tim has this incredible forum for all of us to help each other along the way.
      Time flies over us but leaves it’s shadow behind, Nomad

  3. Tim, I wasn’t sure where to post this so just put it here. I was looking at your model portfolios and wanted to ask if you would consider doing ones similar to the Medium Duration Income Portfolio, but one for taxable accounts and one for IRAs. Just a thought. Thanks

  4. Any opinions on Assured Guaranty specifically AGO-B. Good coupon for A rated debt (SP rating) or BAA2 (Moody’s) at 6.875%. Kroll reenforced their ratings in Nov 2018 at AA. The initial offering of this issue was done by FINANCIAL SECURITY ASSURANCE HOLDINGS. This company was a victim of the 2007 financial crisis and acquired by Assured Guaranty.

    Assured Guaranty has been around since 2004, so they survived the financial crisis.

    Appreciate any insight that anybody has

    1. Steve, Gridbird has a good handle on it. Upon his suggestion some weeks back, I bought a small amount of AGO-B.

      1. S&P has a recent revaluation and was very positive going forward. I am not in it now, but bought when it met my criteria…Burrowing into past call above par issues that would have a stiff backbone on preferreds cratering….It did its job! Now the mission is looking for under par fodder with similiar yield and quality which is around some…This strategy just leaves a crack in the door for some cap gain trading, too.

  5. It is my experience that share prices bob up and down like boats with the tide. I used to sell when $SP went down, only to see them pop back up again. I would often lose a div in the interim. Now, I examine a company’s financials relative to the market to determine if the price drop is due to fundamentals or market psychology. I sell if the fins look weak. My biggest pain is managerial malfeasance leading to BK. Can’t foresee that.

    1. Addemdum: A safety valve might be to establish a certain % drop to trigger a sale rather than watch $SP drop too far. Any ideas on what that % might be?

      1. Jeff, You’re not alone. As Tim points out so perfectly, we all experience those cringe-moments when the best laid plans go awry. Each investor has to decide what’s best for them, though regarding your potential strategy, let’s glance at a long-term chart of Apple. Using $SP or % down would have provided many unfortunate sell triggers over the years. Similarly, the sudden sale of a large block of a less-illiquid pfd issue could result in a down $ or % that actually creates a buying opportunity – not a sale. Knowing or being able to quickly re-quantifying the fair value of a position might be the best defense against downside risk, and provide the best opportunity to buy at a discount when the opportunity arises. There are highly talented investors on this site with a lot more experience then I who might want to add color to that. Best wishes.

        1. Hello Alpha
          I agree with you. I stayed invested as the market crashed in ’08-’09 because I “believed ” the company financials were OK and thought it was mostly market psychology. When the market got down into the 7000-6500 level, I began buying again. When I examine the various debt numbers from the financial statements, I can’t see a correlation that suggests potential BK. It appears to me that management simply made the decision to file for BK to reduce debt and wipe out equity, then start over. They win while we lose. No integrity.

  6. Mark to market is important to me, also. This is why I am mostly a “veteran preferred” buyer. I can track history of a preferred through various rate and panic cycles, to get a better determination of what a fair price is or relative discount it may be trading at. This keeps me out of a lot of trouble.

  7. Just want to add my thanks to Tim and to all who participate. I have dramatically changed my investing style. I missed the dot com bubble but started investing on my own in 2002 when my employer 401k rolled over. Thought I was a big shot until 2008-2009 when I realized I would have to work longer to make up what was lost. Not lost really, thanks to the last decade of good returns. Having that experience has taught me the importance of slow wins the race and put risk in perspective. Great to have a spot to commiserate and try to retain rationality rather than let fear take over. Good luck to us all!

  8. While I agree with your basic point, I will also say that there are portions of my portfolio where I intentionally ignore day to day, even month to month, market fluctuations in either direction. There are certain fixed income instruments that I purchased to hold to maturity, and I intend to do just that. If they go down because of a credit quality issue, I care. But if they go up or down because of interest rates or general trading conditions, I usually don’t care. Let me use an extreme example. Suppose you purchase a CD to hold to maturity. If there were liquid markets for the CD, its value would certainly fluctuate with rates. We don’t mark those to market, because we are holding to maturity and the fluctuation doesn’t matter. To me, its the same for certain baby bonds and term preferreds that I purchased to hold to maturity. Unless the company defaults, I’m getting an income stream and $25 at the end—exactly what I signed up for when I purchased the security. How relevant is it to me that it is worth 24.75 one week, and $25.25 the next week? I don’t think it matters. I suppose if it shot up to $27, I’d sell. But for the most part, if changes in prices of those kinds of securities are changing the value of my portfolio in either direction, I heavily discount that information.

  9. I started investing in the early 90’s just as the Dot Com era was coming in. I had 30K to invest and I was buying just about anything as most issues were going up. When the market started to decline, all the talking heads on TV would say, “the market will come back soon”. I was inexperienced enough to believe them and watched 65K go back down to my original 30K, then I sold. What a lesson I’ll never forget! Now I mostly invest in term preferred and baby bonds. I do have a couple of CEF’s to round out my portfolio. I found Tim’s site several years ago and it’s changed my whole way of investing. Thank you Tim for all your time spent on educating a lot of investors.

  10. Worst mistake in my entire INVESTING life was 2000 and not doing MARK to MARKET daily. Lost 50% of my net worth. Lots of different Janus funds all invested in high flying Nasdaq. Tim is 1000% right, mark to market daily and never accept losses.

    I brought my 1st preferred stock in March built out my portfolio by Sept/Oct and OUCH. Just when I got it built. But how bad is OUCH? -0.9% for YTD when you consider the dividends. But, it’s only that small amount thanks to all the information everybody shares on this board. If you cannot tolerate that kind of loss, you belong in bank CD’s or money markets. The small amounts I hold in mutual funds and total market index, I am better than those investments.

    Now with that said, I believe in establishing loss threshold(s) to begin to move to cash on a laddered basis. -0.9% is not near that level yet.

    1. 2000 was a tech investor nightmare. I remember the days of 2007-2009. I was in my “high roller” phase as Tim would say. I thought I could out think the market. My entire portfolio was common stocks in 2007. My risk level was high but my tolerance level was actually lower because of that all equity portfolio I took at hit at the beginning of the big downturn but got out early, sat on the sidelines and do to pure luck, got back in the week the Mark Haines bottom was proclaimed. I recovered all the losses and then some but I realized that I wasn’t getting any younger and my working days were numbered and boy did I not want to go through that again at my age. So I morphed into a more conservative investor and found Tim’s portfolio’s on the old site. It really got me thinking about risk and capital preservation.

      The people posting on this site today still have me thinking.

      1. In 2007, all stock investments also. Moved to sidelines LIGHTING fast and did fine in cash.

        One thing about our economy now, is that I will not accept that we are not going to have a recession or slowdown in the next 5 years. We have already gone longest in history without one. I do not believe “this time is different” clique. So, 31% of my preferred/individual stock portfolio is now in Telco’s and Utilities. Not pleasant right now, because finding Telco’s and utilities that pay a high enough coupon means investing in companies with lots of debt and the market is in a “debt panic” in my opinion. Also not the time in the market cycle for Telco’s and utilities but their time will come I believe in the next 5 years

        1. Steve, I cant say this about telcos, but utility debt is still relative rock of Gibraltar in times of stress compared to other debt…In 2008-09 distressed crisis era, banks and financial $25 par preferreds were dropping to $3-$7 a share, Utility preferreds with same par yield and even less were still trading in the $15-$18 range..

        2. SteveA,

          If you believe that a recession is in the near future, you should stay away from high debt companies. Things will go very badly for companies with a lot of debt in a recession.

  11. Thanks Tim for putting our fears in perspective. Thanks for your wisdom. It is very hard to sell something when you’ve taken a loss but sometimes you have to pull the trigger and dump an investment and move on.

    Such was the case this week with my holding of CTDD. Despite a nice yield I realized that the day I bought the shares I must have been braver than I normally am. Maybe it was something I ate but whatever made me take that leap, I had to remind myself what were my investing goals and did CTDD fit my risk profile. I came to the realization that it did not. What was I thinking ? Maybe it was a senior moment. I swallowed hard and took a couple dollars per share loss and moved on. Century Link (parent company) is not in my sleep well at night wheelhouse.

    I look at my revamped portfolio of baby bonds and preferred stock holdings and I feel much better about it today. I’ve moved up in quality. Some of the issues may be more rate sensitive than some of the discarded junk and the yields are a little lower but I don’t worry about whether they’re going to be around tomorrow. I can handle the ups and downs in share price as my stated holding period is almost as long as Buffett’s…until it’s not! I just need to remind myself of that before taking any more wild forays beyond my comfort zone. Lesson learned.

    My IRA portfolio was down .55% this week and yet I’m totally cool with that because of what I hold. My tolerance level is directly correlated to the quality of my holdings.

  12. If you’ve been an investor for 47 years, then you’ve seen at least one more market cycle than I have. And I’ve seen enough cycles to know that cycles happen, they are unpredictable on both the down side and the up side, and trying to time them is completely beyond my ability or interest.

    “Cringe when their holdings are falling fairly rapidly”? “Literally can’t sleep”? No. Never. Not even once.

    I am not as obtuse as many commenters on SA – especially one in particular who writes over and over “I am meeting my income goals” as a euphemism for “I refuse to learn anything new”. But I know what I own, and I know that I am not a trader or a flipper. Especially on the preferred/fixed income side. I am grateful for the continuing education that you folks provide me, but I just don’t fuss and fret about the markets to the extent that most of you appear to.

    1. Larry–I know exactly who you refer to on SA–there are a bunch of them beyond the one we are likely thinking of.

    2. Larry–in my younger days I was a bit of a ‘high roller’–never served me well but did cause lost sleep.

  13. Tim,
    I have been following your blog for a few months and see that you and your followers are kindred spirits. Truly appreciate what you are doing for those of us who are retired investors looking for safe income. Trying to define risks you face with a particular company can be a daunting task even with audited financials at your fingertips. Remember the Glacier Water Trust Preferred stock which was called earlier this year. I had a fairly large position in that, and friends looking at it thought I was crazy. Yet, every time I would see their machines near the supermarket, customers were popping quarters into those water dispensers like a slot machine. Then I would look at their cash flow statements, and realize just how safe this preferred stock was (despite the accounting losses) compared to some of the REITS, investment and finance companies, and Shippers out there. My question for you is whether there are other preferred stocks or baby bonds out there like Glacier Water outside of those industries I just mentioned which might be hidden gems.

    1. Hi Don–glad to have you here. Let me give this some thought–I think there are some out there, but would give more thought before writing.

      Do I remember Glacier Water?–Heck yes–I wrote the 1st article on Seeking Alpha on those trust preferreds in 2011 and followed it up in 2016- Doubled my money on that one.

      Apr. 27, 2011

      Glacier Water Services: Little Known Stock, Tasty 9% Yield

  14. I also think that investors would do well to stop looking backwards so much for guidance as to what will happen in the future.

    CNBC has one pundit after another saying “The market goes up 80% of the time”. Rinse and repeat each day.

    “Don’t worry, be happy” is a song lyric, not reality, IMHO.

    Nothing in our investment landscape is as it was even just a few short years ago. The ‘black box’ and ‘algo’ trading garbage that scans Twitter and Google news feeds to determine how and when to trade, the continued proliferation of influence of social media, the lack of giving a crap about the future by so many of the youngest generations, etc.

    I for one, have changed many of the factors I consider “proper due diligence”. As they say, the times they are a changin’…

    I’ve mostly ignored SA writers, quit listening to Cramer about a decade or more ago, I don’t deal with social media, and I live within my means and invest as such.

    Reaching for yield leaves you susceptible to someone coming up behind you and pulling your short pants down while your hands are up in the air.

    Then what???

    Good Luck to Us All,


  15. Well, I have stocks (equity and preferred) drop a lot only to rebound 1-2 yrs later. If I had sold, I would have been a fool. Most investors buy high and sell low. Got to have some common sense and a great deal of patience.

    1. Giannis–yes most individual investors do buy high and sell low–and performance is much worse than it needs to be.

      1. I would add one more response to your comment: the goal is to have more winners than losers. If one diversifies, he is going to have stocks that under perform and even have losses. By that should be offset by those stocks in your portfolio that are in the “green” and outperform. So having a stock or two that is in the red (loss) isn’t the end of the world.

  16. A very profound saying – “you don’t lose until you sell”.

    Ouch. Learned the hard way several years ago, with a stock called NovaStar, an MREIT that went BK taking down a lot of folks with it.
    Got out with massive losses ( which I’m still trying to write off more than a decade later ), but know of many who hung on, repeating that phrase above like a mantra.

    And I think sometimes of my friend, who owned a few thousand shares of Enron, used to say that phrase whenever we talked about market declines. Well, I suspect he still owns those shares, and hasn’t sold so in his mind he has not lost anything.

    Sold MNR-C for moderate loss today, have been reading about Amazon slowly entering into the ” last mile ” domain of FDX and UPS. MNR has FDX as its biggest client, accounting for almost 50% of its revenue.

    FDX does not seem to be doing so well lately.

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