“An apple a day keeps the doctor away” is a phrase you’ve likely heard many times, whether from your loved ones encouraging healthy eating habits or through popular culture.
This adage has, in fact, been around for a considerable period of time now, with PubMed revealing that it originated in Wales in 1866. Though, at the time, it was “Eat an apple on going to bed and you’ll keep the doctor from earning his bread”.
Of course, research has since debunked this phrase. Interestingly, just as eating an apple every day doesn’t guarantee perfect health, obsessively checking your portfolio once a day doesn’t necessarily improve your financial wellbeing.
In fact, it could actually do more harm than good, hindering its growth. With National Apple Day approaching on 21 October, this could be the perfect time to explore why taking a more hands-off approach with your investments can benefit you in the long run.
Several cognitive biases could make you feel like you need to check your portfolio constantly
It’s somewhat understandable that, when you invest your hard-earned wealth, you want to keep a close eye on it. After all, you want to ensure that your investments are generating the returns you need.
However, this desire to monitor portfolio performance closely may be the result of several psychological biases.
One of the most common of these is “loss aversion”, a bias that means you feel the pain of loss twice as strongly as the pleasure of gains. This fear of losing money can drive you to obsessively monitor your portfolio, hoping to avoid potential downturns.
You might also experience a “fear of missing out” (FOMO), a worry that by not checking your portfolio often, you could miss out on potential gains or opportunities that you’d later regret.
Additionally, if you have a short-term mindset, you may expect immediate results, and checking your portfolio daily might satisfy this desire for instant gratification.
Another factor fuelling this behaviour might be the vast amount of information available today. With market news, fund values, and up-to-the-minute prices available at your fingertips, you might feel tempted to act based on the latest developments.
Though, this constant stream of information might only exacerbate your anxiety, leading to impulsive decisions that could affect your long-term goals. Read on to find out how.
Checking your portfolio regularly could mean you react impulsively to short-term volatility
It’s crucial to remember that markets are inherently volatile, and your investments will naturally fluctuate due to economic factors, global events, or trends.
For instance, consider the performance of markets around the world in August 2024. The Guardian reports that the S&P 500 index experienced its worst day in almost two years on 5 August 2024, finishing down 3%.
An even more stark example comes from Japan, where the Nikkei 225 index saw its largest single-day decline in 37 years, losing 12.4% in one trading session, the Associated Press reveals.
If you had been checking your portfolio daily during this time, you might have understandably felt anxious and tempted to adjust your holdings to prevent further losses.
However, by 6 August 2024, the Nikkei 225 rebounded by 10.7%, while the Guardian shows that the S&P 500 saw its largest single-day increase in two years shortly after the decline.
These short-term fluctuations show that while markets may experience sudden drops, they also tend to recover over time, sometimes much quicker than you might expect.
Yet, by constantly monitoring your portfolio, you expose yourself to a rollercoaster of emotions, such as anxiety during market dips and fleeting relief during recoveries. Ultimately, this can impair your decision-making, and you might be more likely to react to short-term market changes.
In this instance, you could sell your investments during a dip, meaning you risk missing out on the subsequent recovery, turning a paper loss into a real one.
Additionally, frequently buying and selling your shares could lead to overtrading, where you incur more broker fees and losses that gradually erode the value of your investments over time.
There are several methods that can help you avoid checking your portfolio every day
Thankfully, there are several ways you can avoid checking the value of your portfolio on a daily basis, meaning you’re less likely to alter your investments.
Keep a long-term focus
It’s essential to remember that investing is a long-term pursuit – it is a marathon, not a sprint, after all.
Instead of focusing on short-term fluctuations, remind yourself of the potential benefits of compounding growth.
Indeed, visualising your goals – whether that’s a comfortable retirement or funding your children’s education – can help you stay grounded and rooted in reality.
Moreover, breaking these goals into smaller, more achievable milestones could offer a sense of progress without you having to check your portfolio every day. Make sure to celebrate these milestones when you reach them, too, as this can help you remain focused on what you’re working towards.
Your financial plan is tailored to your specific goals, and your strategy will likely be designed with your future in mind. By focusing on your long-term objectives, you could better resist the temptation to check your portfolio every day and make impulsive adjustments.
Avoid the “noise”
Another key way to reduce the urge to check your portfolio too frequently is by limiting your exposure to “market noise”, such as sensationalist headlines, industry news, or information on social media.
This information highlighting sudden volatility can create unnecessary anxiety and often leads to rash decisions. As such, it’s worth asking yourself whether the news you’re reading is based on speculation or fact.
No one can accurately predict how markets will move, so reading “expert predictions” might simply stress you out.
Similarly, social media is full of speculation and misinformation. “Finfluencers”, in particular, might make it seem as though they know how the market will move, and you might experience FOMO if you don’t follow them.
Though, research from Capital One shows that 74% of people who followed financial advice from social media experienced losses or unfavourable outcomes. Even worse, some people may use their social media platforms to promote scams.
Due to this, limiting your exposure to these distractions could help you stay focused on your personal goals and prevent you from constantly checking your portfolio.
Be aware of common biases
As mentioned, there are several cognitive biases that can affect your investment decisions, many of which are made worse by checking your portfolio regularly. These could include:
- Loss aversion – Could mean you avoid losses at all costs and miss out on opportunities as a result.
- Herd mentality – May tempt you to follow the crowd without conducting proper research.
- Confirmation bias – Where you seek out information that supports your existing beliefs, preventing you from making informed decisions regarding your investments.
You may end up falling victim to these biases without even realising it. Thankfully, being mindful of them and understanding how they affect you could mean that you avoid falling into pitfalls that hamper your long-term gains.
Get in touch
We could take some of the stress out of managing your portfolio by carefully monitoring the performance of your investments, so you don’t have to.
To find out more, please contact us by email at info@investmentsense.co.uk or call 0115 933 8433.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
Your capital is at risk. The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
