DGI Adventure -05-06-16 Market Musings – The Case of the Disappearing Imaginary Loss

One of the hardest things to do as an investor is to not freak out over imaginary losses. The only thing harder is not getting too uppity about imaginary gains. It’s only natural to look at our holdings and think about them in dollar terms. The brokerage account constantly reminds you how much your investment is “worth” in terms of current market prices. If you bought 10 shares of XYZ for $100/share and it’s trading for $80/share…it sure looks and feels like you’ve “lost” $200. Of course, you haven’t really lost $200 unless you sell the shares. The value of the shares changed. It will change again.

I like to think I’m pretty good about keeping this mindset. But I have to constantly work at it.

A chart:

image

VER (ARCP prior to 7/31/15) 2 Year Chart – Courtesy Yahoo Finance

VER closed at $9.60/share today. For some reason my brokerage interface says my cost basis is $3,760.18 which for 400 shares would mean $9.40/share. But back in September when I bought more shares I added up all my investments and came up with $3,794.64 or a $9.49 cost basis. I double checked the math again today and I have definitely sunk $3,794.64 into this stock. I don’t understand how Capital One Investing is off by $34.46. That is a really random number to be off by.

I guess it goes to show how hard it is to not let the brokerage account dictate your psychology. When I saw the account today, I got all excited that I had finally gotten back to positive territory on this investment. It’s actually showing a $79.82 gain!

image

Then I realized the thing about the cost basis being off for whatever reason, and I got bummed out because I was only up by $45.36. Why? It’s imaginary. I don’t know! But it makes a difference psychologically. I have to constantly remind myself: it doesn’t matter. Imaginary cost basis bucks don’t really matter. It could go back down again. In fact, it probably will go back down again.

I have, however, made $201.67 in dividend income over the life of the investment…and that isn’t imaginary. And management announced that they’re maintaining the dividend which will pay out on 07/15/16.

VER also announced earnings yesterday, which appears to have been a big boost to the share price this week. They continue to be on track with their plan to get their proverbial poop in a group. They’re reducing debt and diversifying their property portfolio. Mr. Market seems to finally be trusting management because management seems to be delivering on their promises.

And that’s how imaginary losses disappear. Happy Friday, everyone!

Leave a Reply