Investing Competitively? You Might Lose the Game : Finances: Handling your money shouldn’t be a test of prowess. ‘More money has been lost reaching for yield than at the point of a gun,’ says one analyst.

One of the big issues that come up over and over again as people manage their savings and investments is the question of how to keep score.

Often, it seems, they may run their investments in banks and mutual funds, their long-term retirement planning and their shorter-term savings, with little or no thought to what conditions they have to meet to consider their efforts a success.

These are not just abstract, philosophical points. They can be of vital importance to the practical business of meeting your financial obligations in an era when it is easy to lose your way in a morass of information and opinions.

The confusion can be compounded by human emotions--for instance, the competitive spirit that infuses much of daily life in this country.

Are your stocks outperforming the Standard & Poor’s 500? Where does your mutual fund stand in the Lipper and Morningstar rankings? What total return did your financial planner achieve in the past five years?

In short order, the whole thing can become an exercise for the ego, a contest to prove how smart or how skillful you are.

The trouble with that is, “personal portfolio management is not a competitive sport,” says Arthur Zeikel, who as president of Merrill Lynch Asset Management oversees the third-largest mutual fund family in the country. At almost $115 billion in assets, MLAM ranks behind only Fidelity and Vanguard.

“You cannot eat relative performance,” Zeikel says in a recent memo on the subject of “common sense investing.”

“Measure results on a total return portfolio basis, against your own objectives, not someone else’s.”

Professional managers at investing institutions compete against each other, and the market averages, to try to attract and keep customers.

But when you are managing your own savings, comparing your results against any outside standard makes less sense. If you are saving for future college tuition bills, for instance, the only question that really matters is whether you will be able to pay them in reasonable comfort when the time comes.

No matter how eager you may be to tell people about the savvy choices you made to build up your college fund, there probably will be very few people who want to know.

If you see investing as a test of prowess, a game to be won or lost, that perception can encourage you to take ill-considered risks and make decisions for the wrong reasons.

For instance, it can push you to seek out the highest yield you can find on an income-producing investment, rather than balancing yield against risk. Declares Raymond F. DeVoe Jr., an analyst at the Wall Street firm of Legg Mason Wood Walker, “More money has been lost reaching for yield than at the point of a gun.”

Very often, the competitive investor goes through contortions of one kind or another to try to avoid realizing a loss on any individual investment.

But if you hold on to all investments that decline in value, hoping for some future chance to “get out even,” you can wind up with a big collection of losers. That hurts where it matters much more, in the overall value of your assets.

“Don’t be afraid to take a loss,” Zeikel says. “Mistakes are part of the game. The cost price of a security is a matter of interest only to the Internal Revenue Service.”

The desire to avoid losses can also encourage procrastination or too much caution. “Make decisions,” Zeikel urges. “No amount of information can remove all uncertainty.”