The watched pot does not boil. The financial equivalent of this old saw, and one of our personal favourites, which we make no apology for repeating here, is Nassim Nicholas Taleb?s fictional retired dentist. This hypothetical investor is guaranteed to earn 15% per annum from his portfolio with an associated volatility of 10%. These statistics are not open to dispute. But if our investor friend monitors his portfolio in real time, however, the random price oscillations of his portfolio are likely to trigger extreme anxiety. Depending on the frequency with which he observes his portfolio, our dentist will experience varying degrees of heartache and distress. The frequency of portfolio observation versus probability of a pleasurable outcome for our imaginary investor is shown below:

(Editor: I cannot reproduce the table easily but the scale ranges from 50.02% every second to 93% over a year.)

The message is clear. Too much observation can be bad for you. If Taleb's dentist simply restricts the frequency with which he checks his portfolio - a fundamentally sound portfolio - he will boost his chances of incurring a positive emotional outcome from his monitoring. Note that nothing changes about the composition of his portfolio - only the frequency with which he checks it. Investors determined to watch the pot may end up being scalded.

David Fuller's view Long-term investors with clear strategies could save themselves a lot of anxiety by heeding this message above. Most bull markets last for several years but too many investors wind themselves up by questioning their strategy during every market flutter. The less experienced are not helped by the financial media, which provides every known view on a daily basis.

This is one of Tim Price's vintage letters.