20% of Americans Make This Investment Mistake
Investing in stocks and other assets is a great way to grow long-term wealth. In fact, if your goal is to retire comfortably, it’s smart to put your savings into stocks, which have a strong history of delivering solid returns.
It’s also a good idea to check on your investments from time to time, whether they’re in a retirement plan or a brokerage account, to make sure they’re performing the way you expect them to. And as the value of your different holdings shifts, you’ll want to keep checking on your investments to make sure you’re still well-diversified.
But one thing you shouldn’t do is check your investments obsessively. And according to a recent Personal Capital survey, a little more than 20% of people check their investments on a daily basis. If you’re in that habit, it’s time to break it — before it comes back to bite you.
The danger of checking your investments too frequently
The stock market can be very volatile. But even during periods of relative calm, it’s possible for the value of an individual stock to fluctuate from one day to the next, especially if news comes out that impacts trading activity.
That’s why checking your portfolio every day isn’t a good idea. It can be very unsettling to see the value of your investments tumble overnight, and that could, in turn, lead you to make rash decisions — like dumping investments when they’re down rather than giving them a chance to recover.
One thing it’s easy to overlook is that when your portfolio value declines, you’re not actually out any money on the spot. Rather, you only lose money if you actually sell stocks or other investments for less than what you paid for them. And so the last thing you need is to be tempted to take such action over what will often boil down to a temporary blip.
Be in it for the long haul
It is possible to make money in stocks on a short-term basis. A safer bet, however, is to take a long-term approach to investing and plan to hold your stocks for many years. That way, you’ll have time to ride out the market’s ups and downs and come out in a profitable position.
Once you commit to investing on a long-term basis, looking at your investments every day becomes needless. After all, what’s the point in stressing over an overnight decline when you’re not planning to liquidate your stocks for several decades?
It’s all about moderation
To be clear, checking your portfolio every quarter is a good idea. You may even want to have a look every month. But a daily checkup can do much more harm than good.
If you’re in the habit of reviewing your investments every day, use those few minutes to instead meditate, walk around, or do something else that’s good for your health. But obsessing over the value of your portfolio could have the opposite effect — it could cause you unnecessary stress that you don’t deserve to deal with.
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