How often do you log into your retirement account to check the balance? I’d say, on average, people like to check in once a month. However, if you’re like some people who are particularly in tune with their financial goals and their investments - you might find yourself logging in weekly, or even daily.
I’m here to tell you - STOP!
Step away from the computer.
In all seriousness, checking your investments too frequently can have some unfortunate side effects. I know you have the right intentions - it’s a good thing to want to know what’s going on with your money! Too many people bury their heads in the sand, but if you're reading this...that’s probably not you. If you’re checking your portfolio frequently, you likely know exactly what’s up with your money and the markets. Checking in will only cause you more problems.
Checking In Too Frequently Can Hurt Your Portfolio
While it may feel counterintuitive to avoid logging into your accounts, it’s important to take a step back - if only to keep your portfolio healthy. As investors, our biggest mistakes come from human error. That’s right - you could be the reason that your portfolio does poorly.
Let’s take a recent market drop as an example. Earlier this February (2/5/2018, to be exact), the Dow Jones Industrial Average was down 4.6% - or around 1175 points. People freaked out - and rightfully so. That’s a big dip to experience, especially when you look at the personal goals your investments are helping you to achieve. It doesn’t feel like a drop in the market. It feels like your opportunity to retire, freedom to travel, or ability to leave a substantial inheritance are all slowly going down the drain.
The important thing to remember is - that’s just how you’re feeling.
Only 20% of our brain is intended to process analytical information.
The other 80% is focused on emotional response.
If this sounds familiar, it’s because it’s important and I’ve said it before - I’ll say it again, too!
If you’re checking in with your portfolio too regularly, you’re statistically more likely to see a loss. And that can cause you to make some fairly short-sighted decisions. This phenomenon is called myopic loss aversion, and research has proven that the more often you check your portfolio - the more likely you are to avoid risk (even when it could benefit you). Don't believe me, just check out this chart below from Betterment that shows an investor who checks their portfolio quarterly instead of daily reduces the chance of seeing a loss of 2% or more from 25% to 12%.
Do It For Your Mental Health
In a perfect world, we wouldn’t react emotionally every time we see a drop in the market or a loss in our portfolio. Of course, this isn’t a perfect world. And seeing the nitty-gritty of every day market fluctuations takes a toll.
As human beings, we’re wired to want a basic sense of control in our lives. In fact, when we feel out of control, it can lead to serious mental health issues like depression and anxiety. Here’s the thing, though: you can’t control or predict the stock market. Nobody can. Even experts who have years of experience watching the market and predicting what it will do next lose out sometimes. That’s the nature of the game, and the reason you should have a carefully constructed investment strategy that focuses on long-term gains.
Checking your portfolio too frequently may lead to bad investment decisions - and it also can negatively impact your mental health. In all likelihood, your investment strategy isn’t built around a single day’s stock performance. You’re playing the long game, so watching short term gains and losses is taking on unnecessary stress.
What About the Pros?
When people envision investment gurus and professional financial planners, they often picture this:
Multiple stock tickers plastered on plasma screen TV’s in a big office. Phone is ringing off the hook as the advisor buys and sells at a moment’s notice. There’s a lot of loud talking and leather bound books for some reason, too. It’s a scene straight out of a Hollywood depiction of Wall Street.
Well, I hate to burst your bubble. But most professional investors and financial planners don’t check in with the stock market every day. Warren Buffett doesn’t even have a computer in his office! That’s because he doesn’t let short term market movements impact his long term investing decisions - and neither should you.
As for myself? I only check my portfolio once a year. 😳 That’s right - I log in once a year to see how things are going, and to rebalance if necessary. So stop logging in every day! In a perfect world, you should be checking your investments annually, maybe twice a year. If you get the itch to do so more frequently than that, try to stick with quarterly at most.
How Can You Stay On Track?
Apart from forgetting the password to your accounts, it can be difficult to take our hands off of the steering wheel and let our portfolio do it’s thing. This is where hiring a fee-only CERTIFIED FINANCIAL PLANNER™ can be helpful. Giving the reins over to someone who is a financial professional can alleviate some of the stress you’re feeling, while make it easier for you to step away from your portfolio and take a more hands-off approach.
And the best part? A financial planner isn’t just there to help you manage your investments. I help my clients develop an investment strategy that puts them on a path to meet short and long-term financial goals, create a retirement spending plan, decide when to begin taking their Social Security benefits, and make lifestyle choices that ensure a fulfilling retirement. Checking in on your investments is just one of the many financial benefits that come with partnering with a fee-only CFP®.
Interested in learning more, or just want a sounding board to help you STOP checking your investments every other day (or hour)? Schedule a FREE consultation! I’d love to talk to you and help you find some peace of mind when it comes to your investment strategy.
Getting on track for retirement doesn’t have to be confusing.
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Desmond Henry is a fee-only CERTIFIED FINANCIAL PLANNER™ professional and founder of Afflora Financial Life Planning in Topeka, Kansas. He helps the retiring/retired plan their finances and invest their money. CLICK HERE to learn more.