With technology, we have the ability to obtain information about our investment balances on a daily basis and on a real time basis with most brokerage accounts. With this access the obvious question becomes, how often should we be looking at our investments?
For many there is a tendency to go overboard with this information, and have too much short-term focus. For others this information is ignored, and investors fail to make appropriate changes.
For example during a down market, the person who is looking at their portfolio constantly may panic, and get out of the market at the wrong time. On the other hand, the person who is too fearful to look at their account, could miss an opportunity to add to the market.
For a 401K plan and other accounts that are invested in funds, your investments should be reviewed at least on a quarterly basis. That does not necessarily mean making changes, but just insuring that your investment mix is appropriate for your objectives.
During volatile markets you may want to review monthly, as a major market move may cause your mix between stocks and bonds to deviate significantly from your target.
If you have accounts that have individual securities then more frequent reviews are necessary. Probably looking at the account on a weekly basis would be appropriate for most people.
Because investing in individual stocks is more time consuming, it is not for everyone. You can still get exposure to the market with mutual and exchange traded funds, if you do not own individual stocks. While I believe multi-year holding periods are appropriate for most stocks, unexpected developments do occur, which is why individual stocks should be monitored fairly frequently.
For people who have a retirement account some may think that they are a long-term investor, and will just accept the ups and down of the market. While being a long term investor is the correct approach, there are some problems with being too complacent.
For a younger person who may only have $5,000 invested, a 30 percent drop in the market is not that significant of a dollar loss. However, for someone nearing retirement, who maybe has $500,000, and has kept the money all in stocks, a 30 percent market drop would be very painful.
When the market is doing well there is a tendency for people to leave things alone. However, if someone has a target for 60 percent in the stock market, and their account has grown to be 75 percent in stocks then sales should be made.
It is certainly better to be making sales when the stock market is doing well. That is why a long-term investor still has to monitor their account to some extent.
Technology has given us the ability to access information in a very timely manner. It is certainly much more convenient to be able to access our financial information whenever one desires, versus having to wait for a paper statement, or looking at stock prices in a newspaper.
However, it is important that we use this information in a way that benefits us. Unless, one is a full time investor there is no need to monitor our accounts daily, but we shouldn’t ignore our investments either.