Checking Your Portfolio Often? Stop It! It Could Affect Your Earnings

When you have a substantial portfolio, you might find yourself unable to keep from checking it regularly. After all, it's really exciting to watch it grow and grow. And even if you don't have much of a portfolio put together yet, you may still feel the pull toward checking your investments. 

I like checking my portfolio every couple of months because I'm a diehard passive investor. Any sooner than that, and I think it'd drive me nuts. ("Whaddya mean, I only earned $100 in six months? You've got to be kidding!") Sound familiar?

You might find that checking your portfolio daily carries some negative effects. Let's explore these and give you a few reasons exactly why you should stop checking your portfolio once, twice or even three times daily. 

Reason 1: It tempts you to react to market fluctuations.

The stock market buckles and rises, gains and loses constantly. You may know just as well as anyone that it's completely normal. The funny thing is, even though you're aware of this, watching the market fluctuate right before your eyes might still make you overthink things. 

When you frequently check your portfolio, you might not be able to distinguish between the long-term gains and what you see right in front of you, especially when you log in and see losses consistently. It's easier to trust the market's historical average annual return from 1926 through 2018 at 10% to 11% when you rarely look at your portfolio. (The average annual return since adopting 500 stocks into the index in 1957 through 2018 is roughly 8%.)

Trust the process. It's easier said than done, but remind yourself it won't help if you don't make a daily habit of obsessively checking your portfolio.

Reason 2: You might put your overall strategy at risk.

Most passive investors start out with a well-thought-out strategy. Remind yourself of that!

Watching what happens to your portfolio on a daily basis might put you in the danger zone because you might start to question everything. Remember when you talked with your financial advisor or originally set up your money with a robo-advisor? Your advisor or robo-advisor took into consideration your time horizon, your age, when you plan to retire, your risk tolerance, your earnings and how much money you plan to spend in retirement. 

When the market has a down day, you might err by unraveling your built-for-you strategy. Stick to the plan. Your advisor (or robo-advisor) carefully built your portfolio, and it takes time to get to your end goals. 

To quote the cliche, Rome wasn't built in a day.

Reason 3: You might feel frustrated by the slow crawl. 

When you don't see much progress ("Did I really lose $1,000 from yesterday?"), it can drive you crazy. Even if you don't plan to make any real changes when you check your portfolio, watching small market moves can frustrate you and make you feel like retirement will never get here.

Instead, meet with your financial advisor or check in with the company that manages your retirement portfolio every six months or so. Checking on your overall growth at spaced intervals makes more sense for a healthy long-term strategy.

Reason 4: It's psychology: You feel the pain of losing money more than earning it.

Economics psychologists Daniel Kahneman and his associate Amos Tversky originally coined the term "loss aversion" in connection to subjective probability. According to the paper they wrote, investors respond to losses much more strongly than they do when they make corresponding gains. In other words, we dislike losing money more than we enjoy making it. It causes us deep pain to lose money compared to feeling joy when we earn it. 

The more time you spend checking and analyzing your portfolio, you may let your emotions get in the way.

Reason 5: Technology makes it easy to see whether you're on the right track. 

Really, here's all the reasoning you need: App algorithms make it so easy to see how your income will perform in retirement. Every time I log in to my robo-advisor, for example, it tells me right away, "You're on track to meet your savings goals for retirement."

Technology makes it so easy to whether you're on track, so heed the algorithms. They're smarter than you. They can calculate how much you'll have when you hit your final retirement goal. 

Reason 6: It might encourage you to trade.

For passive investors with no experience trading, the urge to trade could signal the death knell for your portfolio. Looking at your investments constantly could lead you to think, "Gee, I wonder if I'd earn more if I started trading lumber futures?" 

You could then lose money. Trading and losing could cost you money in capital gains and trading commissions. 

Steer Clear of Obsessive Portfolio Checking

Checking your retirement portfolio every day to monitor daily price movements might seem like what you should do to monitor your portfolio. However, passive investing should involve less scrutiny. 

The better overall plan involves putting together a retirement strategy that incorporates your goals, retirement or short-term investment timeline.  

Check in every six months or once per year (which is more fun, anyway because you may see much larger gains!) to document your investment goals. This will help you way more in the long run than randomly glancing at stock prices. If your portfolio hasn't responded well over time, then you can make a plan to adjust. You can always opt for a different robo-advisor or financial advisor if you feel you need different guidance to meet your future goals.

I'll also acknowledge how addictive it is to check your portfolio — it's like social media. In fact, what did I do while I was writing this article? 

I checked my portfolio. I know, I know, sometimes the pull to do so is irresistible. 

But will I stay the course? 

Yep, yep. According to my robo-advisor, I'm 93% likely to reach my retirement goal. Slow and steady wins the retirement goal.