Constantly checking your investment account can be quite stressful. The stock market naturally fluctuates, going up and down all the time. If you look at your investments every day, you'll inevitably see losses about half the time, which can be quite disheartening.
This phenomenon is tied to loss aversion, where losing money feels far worse than the joy of gaining money. Therefore, seeing losses half the time feels significantly worse than seeing gains half the time feels good.
To avoid this, consider checking your account less frequently. Instead of daily, try checking monthly, quarterly, or even yearly. By doing so, you'll encounter fewer losses and maintain a healthier perspective on your investments.
Frequent monitoring can also lead to making unnecessary changes. If your investments are well-diversified and aligned with your goals, it's often best to leave them be during turbulent times. Chasing performance by shifting money from underperformers to recent winners can be a trap. Recent performance doesn’t predict future results, and by the time you make changes, the trends may have already reversed, leaving you with less money.
Additionally, constantly checking can cause you to invest more conservatively than you should. Even though your investments are meant for the long-term and you can afford to take on some risk, constant monitoring can make you think short-term. Research shows that focusing on short-term movements can confuse risk with volatility. Risk is about losing money permanently or not having enough to meet your goals, while volatility is just the ups and downs your investments experience. Successful investors understand that volatility is normal and accept it as part of the journey.
Money managers also play a crucial part in helping manage stress related to investments. Particularly, fee-only fiduciaries work in clients' best interests by law, providing a level of trust and assurance. However, even with a money manager, it's still possible to stress yourself out by overly checking up on your portfolio.
Frequently checking your investment account can lead to increased stress, unnecessary changes, and overly conservative investments. By checking less often and relying on the expertise of a money manager, you can reduce stress, avoid performance chasing, and stay committed to a long-term investment strategy.
General informational content only. Not tax, legal, or investment advice. Consult a financial professional before making investment decisions. Conduct due diligence.All investments involve risk, including potential loss of principal.
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