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Sometimes It’s Just Better Not to Watch: Track Your Investments Less, Watch Your Stress Fall

Sometimes It’s Just Better Not to Watch: Track Your Investments Less, Watch Your Stress Fall

How often do you check up on your investment portfolio? Are you one of those who track it every day, recording the ups and downs in a spreadsheet? Or maybe you check it once a month, when you get your statement, noting whether it was a good month or a bad month. Or maybe you’re the holder of a well-diversified portfolio and are comfortable with checking in on your holdings once a quarter or so.

I’m going to go out on a limb and make a purely unscientific hypothesis here: The frequency with which you check in on your holdings is directly correlated to the level of stress you experience from your investing experience. If you are a daily tracker, my guess is that your stress level rises and falls inversely to how the “markets” did that day. If you check in monthly, you experience a brief period of pleasure or pain, depending on the amount of increase or decrease to your bottom line. Check in quarterly or less often? You have more important things to do than to stress over your investments.

There is no right or wrong answer to the question of how often you should check in. It’s just like there’s no right or wrong answer to whether you are a conservative, moderate, or aggressive investor. Both are part of your investing personality and are not likely to change.

But sometimes I think there is something to be said for not monitoring every move. The way the markets have moved over the last couple of months is a pretty compelling reason of why I feel that way. December was pretty ugly for the world’s stock markets. For the first three weeks of the month, it seemed like we were surely experiencing the beginnings of another major market crash. After a 290-point gain in the Dow on the first trading day of the month, it was mostly downhill from there, including a drop of 800 points the very next day. It seemed like we were seeing the index drop 500 points one day, 600 another, and an additional 500 the day after that.

The Santa Claus rally that we often see heading into the holiday season didn’t seem to materialize—until the day after Christmas. We saw the Dow jump 1,100 points and then stage a big turnaround the next day to add 250 more points. Since then, the rally has continued, with U.S. stocks showing a gain of over 10% so far in January.

Those watching and tracking short-term movements in stocks subject themselves to emotional swings that can cause damage to their long-term financial success. When we’re watching our hard-earned investment dollars shrink every day, it can get scary. We want to stop the bleeding and protect what we have left, and the only way to do that is to sell what we own for the safety of cash. A lot of people did just that in December.

Mutual fund inflows and outflows are a popular measure of investor sentiment. When feeling confident, investors are often buying, resulting in inflows. When feeling fear, investors are often selling, resulting in outflows. For December, fund outflows matched those of March of 2009, when the last bear market ended. Put another way, these investors are selling at low levels. Since the markets have (mostly) recovered in January, flows have increased, meaning now investors are buying at higher levels. Buying high and selling low is not how to play the investing game.

Let’s say that you were lucky enough to have some vacation time saved up at the end of the year and decided to take a few weeks and just unplug, coming back in mid-January. Upon your return, you decide to check in on your holdings. What you would find is that your investments haven’t changed much.

If you looked at the day-to-day fluctuations we experienced while you were gone, you would see that things were changing—a lot! But over a longer period (and a month can hardly be considered long term), it’s not nearly as dramatic. Less drama is good for your stress level and will help you stick with your long-term investment strategy more easily. So sometimes, it’s just better not to watch.

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