How frequently should the average investor check their account balances?

David Schawel
Oct 30, 2018 · 2 min read

Since the end of September investors have been somewhat surprised by the rapid drop in equity prices (as of October 29th the S&P 500 fell ~9.6% from its mid-September highs). These type of drops are far from uncommon, with the most recent examples being a 10.1% drop in January of this year, and a 14.1% drop in February of 2016. Unfortunately for stock investors, even those who have benefitted from a decade long bull market, is that according to Amos Tversky and Daniel Kahneman’s loss aversion theory, losses impact investors more than gains. More specifically, their theory states that, psychologically, losses are twice as powerful as the satisfaction of gains in the minds of investors.

Is it productive for the average investor to constantly check their account balance with CNBC’s “Markets in Turmoil” echoing in the background? All things considered, how often should you be checking your investment balances? Before we attempt to answer that question, we first need to ask a few other questions.

  1. Does your current portfolio match your time horizon, investment objectives, and risk tolerance? Being on the right path for your specific situation is the most paramount question. Investors who have near term liabilities to meet, or other potential uses for funds may well indeed be unable to afford broad market fluctuations. Conversely, retirement assets for investors with a time horizon of twenty to thirty years plus can obviously accept greater interim volatility. This is where asset-liability management and knowing your willingness to take risk becomes crucial. Note that an ability to take risk does not necessarily mean the willingness and vice versa.
  2. Will checking your statement cause you to make an emotional decision inconsistent with your planned objectives and risk tolerance? “Hold on a second David, I really do not think I’m an emotional investor. I know the market has its ups and downs”. It’s not that investors are normally irrational, just that they tend to become irrational at the worst possible times. We have seen fear of missing out numerous times in recent years whether it be bitcoin, cannabis stocks, recent IPOs, and more. Heading back to the great financial crisis, many investors capitulated near the bottom as they couldn’t stomach another day of declines.

All that being said, this is not a suggestion to lose your online password and ignore every headline and mention of the stock market. Reviewing your accounts every few weeks or month is healthy and for many investors can be interesting. The goal is to strike a healthy balance between accepting and understanding the normal ups and downs of the market and performing a proper amount of diligence on your portfolio whether that’s by yourself or if you have an investment advisor.

Feel free to contact David at dschawel@familymanage.com or visit us on the web at www.familymanage.com

David Schawel

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Chief investment officer at Family Management Corporation https://www.familymanage.com