Frequent Portfolio Monitoring May Hurt Your Investing Acumen In The Long Run

Mr Budget came across an interesting study today and thought it might be interesting to all too. 

According to the study, the more frequently you check on your investments, the worse it will likely seem they are performing.

So the more frequently you monitor, the less likely you are to be investing correctly for the long term.

Wow.

So apparently, the logic goes: the more you look at your portfolio, the more likely you will see a loss since you last looked, and the more you perceive investing to be “risky”. This is a phenomenon known as myopic loss aversion.

On top of that, the more you look at your portfolio too, there will be more opportunities or circumstances to buy or sell your positions. This is likely to cause short-sighted decisions and could hurt your investment performance, often resulting in a lesser return as compared to someone who is holding their positions long term. 

Investors who got the most frequent feedback from their portfolio (and thus the most information) took the least risk and earned the least money.

New York online investment firm Betterment shared some insights as to who among their users are more likely to actively monitor their portfolio:

The more you log in, the more likely you will observe a loss.

Of course, the company also shared some interesting insights they observe from their users:

  1. Male tend to log in to monitor their net worth more often
  2. The younger audience tend to log in to monitor their net worth more often
  3. Audience with lower net worth monitor their net worth more often
  4. You are 21% more likely to monitor your net worth if you are using the mobile app

Coming from a personal experience, Mr Budget can attest 100% to this.
Mr Budget is addicted to monitoring the returns of his portfolio and everyday he would look at his stocks share price via the Yahoo Finance mobile app. If you don’t call that addiction, I don’t know what else you can call that.

And it’s logical to follow the thought process behind what Betterment shared, that one is more likely to react emotionally than rationally if he looks at his portfolio very often. 

This is probably a reminder to Mr Budget that one should not monitor the portfolio that regularly. Definitely not every single day.

According to Betterment, if you are checking your portfolio more than once per quarter, you are already doing it too much!

Have a good weekend everyone!

Like our Facebook Page for more articles like this: Mr Mrs Budget

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s