- Investment apps have made it too easy to verify your investments, according to financial advisers.
- Checking your investments too often can lead to emotional decision making and big losses.
- Investing should be a long-term game, so pick companies and funds that you can stick with.
- Read more stories from Personal Finance Insider.
Investors have been on a wild ride over the past few years, and this is especially true for the stock market in 2020. The pandemic initially wreaked havoc on the economy, causing the Dow Jones Industrial Average To plumbs to around 20,000 in March 2020.
But, you wouldn’t know it today. The Dow Jones and the S&P 500 are hovering near record highs, and both indices have reached returns of over 18% and 23% respectively at the time of writing.
If you were investing in 2020 and watching the numbers closely, it would have been far too easy to panic completely, sell and transfer your cash investments at the worst possible time. Sadly, many investors have done just that, causing them to lose the astronomical gains the stock market has made during 2021.
Partly for this reason, financial advisers suggest that you only check your investments once a month, quarterly, or even less.
Why does it make sense to ignore the ups and downs of the stock market? We asked the financial advisers to explain.
1. Investing is (or should be) a long-term game
Indianapolis financial advisor Thomas Kopelman says many millennials use
to track their portfolios more than once a day, but “that’s not how it’s supposed to be.”
Checking too often turns investing into a game and can cause people to make sudden changes based on media headlines and fear, he says. In the meantime, the time horizon of young (or even younger) investors is so long for retirement that they don’t need to closely monitor daily market movements.
âThe goal of investing is to find investments that you really believe in for the long term and invest in them for a very long time,â says Kopelman. “This is how you leverage capitalization and build wealth.”
2. Your investment strategy shouldn’t change on a whim
Financial Advisor Jeff Rose of Financial Bons Cents says that ultimately, your investment strategy should correlate directly with your financial or retirement goals. If you have a plan in place and you’ve sought professional advice to help put that plan in place, then daily fluctuations don’t matter, he says.
Rose compares a constant investment in tinkering with a 10 hour drive to the beach where you end up falling in the rain along the way.
“Would you turn around and go home, or would you continue?” He asks, adding that he thinks most people would keep moving forward because they had not reached their goal.
âIt’s no different to planning for retirement and encountering a few thunderstorms along the way in the form of the stock market.
, Rose said.
3. You will stress for no reason
Financial advisor Jordan Nietzel of Trek Wealth Planning also points out that checking your investments daily is a recipe for stress and anxiety. If you were someone who watched the stock market closely last year, then you already know exactly what it means.
If your investment horizon is decades in the future, then daily, weekly, and monthly market movements are not important to the end goal, he says.
He adds, âStay focused on the big picture and don’t lose sleep over the inevitable ebb and flow of the market. “
4. Ignoring your portfolio helps you avoid emotional mistakes.
According to heritage advisor Stephen CarriggThe main reason for not checking your investments more than once a month is to reduce emotional errors. He points out that the market plunges 5% or more on average a few times a year, and your emotions may prompt you to sell on darker days.
If you listen to that voice, all you do is lock in a loss or less than you had just before.
âThe best investors I know could check their accounts once a month at most,â Carrigg says. “Make the plan, invest accordingly, and play the long game.”
5. There is almost too much information out there
Financial planner Gregory J. Kurinec from Bentron Financial Group says individual investors have seen a dramatic increase in access to information over the past 15 years, and that information has been used to empower people to make better and more informed decisions.
When it comes to the stock market and other investments, however, there are so much contradictory information that people feel overwhelmed, more uncertain of themselves than ever, and more inclined to experience FOMO (Fear of Missing Out).
If they take a step back and stop reviewing their investments on a daily basis, they can let their long-term financial plan unfold, Kurinec explains. He also points out that billions of dollars have been earned by previous generations who have adopted a long-term buy and hold strategy.
âThis is a proven method for creating and protecting wealth,â he says.
6. Young investors have a long way to go until they are 59 1/2
If you are investing for your golden years, chances are you won’t even need your money for a while. Even if you’re 40, for example, you’ll probably be 20 or more until you retire.
Financial Advisor Cameron L. Church of Sound Foundation wealth advisers also points out that most people have to wait up to 59 1/2 years to withdraw money from their retirement accounts without penalty anyway.
âFor many of us, it could take several years, and the markets are going to move a lot during that time,â he says. “If you’ve done your homework or worked with someone to create a good long-term investment plan, be confident that it will work.”
7. For most people, time is on their side
In addition, in general, time is a major asset for investors who have plenty of it. This is especially true for people who are 15 years or older before they plan to access their money, or before they really need it.
In this spirit, wealth manager Richard Cooke of Vincere Wealth Management points out that checking your investments daily is like planting an oak tree and digging it up every few days to check its roots.
It’s important to understand your time horizon and your tolerance for risk, he says. Other than that, you should allow time to do what it’s supposed to do and focus on the other important things in your life.
8. You are unlikely to outperform the market.
Financial Advisor David H. DeWitt of DeWitt Capital Management also points out a very troublesome truth about investing – the fact that you probably won’t “win” at the game you play anyway.
DeWitt says that companies like Dalbar report annually that the average investor performs significantly below the market.
âThe only way this is still possible year after year is to make buying and selling decisions at the wrong time, often fueled by emotion,â he says. “The more you look at your investment account, the more you forget about the big picture and the more likely you are to make a decision that you might regret later.”
9. Your best bet? Focus on what you can control
Finally, financial advisor Russ Ford of Wayfinder Financial says most people have little time and mental energy to spend on money. With this in mind, most people are much better off focusing on the areas of their life where they really have a say.
In the same way that a fitness expert would tell you to spend your limited time focusing on healthy eating and working out more often, Ford says the majority of people are better off focusing on saving and working out. investment every month. After all, putting more money aside for retirement will be a good decision, no matter what the market does over the next ten or twenty years.
Better yet, Ford says to devote some of your extra energy to reassessing the rest of your financial life plan, like goal setting and life planning, tax planning, insurance and benefits planning. , debt planning, education planning and estate planning.