How Often Should You Check Your Stocks?
It's easier than ever to keep track of your investments 24/7, with increasingly powerful tablets and smartphones bringing you instant access to your portfolio's minute-by-minute value. But do you really need to follow your portfolio all day, every day?
For most people, the answer is a resounding no.
Don't Be a Glutton for Punishment
As investing and personal finance expert Larry Swedroe has pointed out, checking your portfolio on a daily basis greatly increases the chances that you'll inflict painful bad news on yourself.
Swedroe notes that on average, stock prices fall roughly 50 percent of the time in any given day -- meaning that half the time you'll end up feeling bad about your investments. But the general upward trend of the market means that if you check less frequently, not only do you get bad news less often, you'll get it a smaller percentage of the time -- about 38 percent of the time if you check on a monthly basis, and about 28 percent if you look only once every year.
Moreover, by tuning out the daily noise, it's easy to stay focused on the fundamentals that drive stock prices in the long run.
Jack Bogle, founder of the popular Vanguard Group, has long advised investors to ignore the stock market's volatility, as it distracts you from making smart long-term investing decisions. And anyhow, by the time you hear about important news, it's usually too late to take action, as the stock price has generally already moved.
Find the Right Balance
Of course, it's easy to go too far in the opposite direction if you neglect your portfolio for too long.
Over periods of years, changing market conditions can lead to big swings in the risk level in your portfolio. Checking in occasionally to do some regular portfolio rebalancing will prevent your investments from getting out of balance.
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For instance, since 2009, the stock market has more than doubled. If you haven't made any adjustments to your overall investment mix, you might well have far more invested in high-risk assets like stocks than you thought.
For those who invest in individual stocks, moreover, staying tuned to major announcements like quarterly earnings reports can be a great opportunity to check how a company is doing compared to your expectations.
If you have the discipline to avoid reflex responses to the immediate headline news of the day from a company releasing earnings, quarterly reports are usually jam-packed with new information about a company's long-range business prospects. By staying up-to-date on changes to overall strategic visions within a company, you can verify whether the stock still makes sense as an investment for you.
What's Right for You?
There's no single answer for everyone that gives the perfect length of time to go between checking in on your portfolio. But here are some general rules to consider:
The simpler your investing strategy is, the less often you'll need to watch how it's working. More complicated strategies often don't work if you don't keep a careful eye on market conditions, so if you use them, you'll need to take more advantage of your ability to stay connected to what's happening with your assets.
The more prone you are to respond emotionally when something goes wrong with your investments, the less you should look. Anger leads to irrational action, and acting when you should sit tight is one of the biggest mistakes investors make.
If you have a professional financial advisor, don't assume that you should check your investments any less frequently. Advisors won't necessarily contact you as often as you'd like, and they may not pay attention to the things that are most important to you. Keeping abreast of your own finances is crucial even if you've hired people to help you.
By keeping these rules in mind, you should be able to figure out how often you really need to pay attention to your investments -- and how much time you can free up to pay more attention to other important things in your life.
Plus, by buying shares of companies that are able to grow their earnings and dividends over time, you'll make money over the long haul, irrespective of how share prices move from day to day or minute to minute.
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