How Often Should I Check My Portfolio?

How often should you check your KiwiSaver balance or investment portfolio?

In today’s world we demand 24 hour a day, seven day a week access to information, via our mobile and other devices. We consider anything less unacceptable.

In an age where you can check your investment portfolio or KiwiSaver account balance as easily as your social media feed, it is tempting to peek at your investments every day. Should you?

Probably not.

Before we break down why not, let’s consider a comparison often used by the world’s most famous investor, billionaire Warren Buffett, to illustrate how successful investing is a long-term game.

Buffett often uses a farm analogy to illustrate the importance of focusing on an investment's value rather than its fluctuating market price. He suggests that if you own a farm, you wouldn't be concerned about receiving daily offers from your neighbour to buy your farm; instead, you'd focus on the farm's productivity and long-term potential. This perspective encourages investors to concentrate on the fundamental performance of their investments rather than being swayed by short-term market movements.

The Problem With Checking Too Often

Market movements can be unpredictable and intense. In the investment world, this is called volatility. One day, your portfolio is up: the next, it’s down. But over long periods, the market, due to general economic prosperity, long-term collective growth and overall advancement, tends to go up. That is why people invest in financial markets, after all.

Counter-Intuitive

Every day we are reminded that the harder we work at something, the greater the reward. This is a mantra which is or was reinforced during our childhood in the classroom, during sport, at the office or worksite, at the gym… and in most cases, it is correct. However, when it comes to investing, this is usually the exact behaviour you should avoid.

The Problem with Regular Portfolio Checks

If you check your investment portfolio – including KiwiSaver account balance – too frequently, you risk making emotional decisions — selling in panic when markets dip or getting overconfident when they rise. Neither is a good long-term strategy.

Surely paying more attention and making more decisions creates better outcomes – right? Or maybe not. One of the reasons is the psychological concept of myopic loss aversion. In short, in this context loss aversion refers to the fact that people dislike losing money much more than they like gaining money. For example, an investor who sees a share price drop by 10% might panic and sell, even though the fundamentals of the company haven’t changed. Meanwhile, they might hesitate to sell a stock that has underperformed for years, hoping it will recover, even when better opportunities exist.

But loss aversion, coupled with these short-term fluctuations that create news headlines, drives us to constantly check our portfolios and reassess our decisions. This may make you more likely to change your investment plan, whether that’s withdrawing money or adjusting your risk exposure in a KiwiSaver Scheme or other managed fund – over the long-term that will lead to lower returns!

Surely doing something – anything, is better than doing nothing? Though just like in Warren Buffett’s example about the farm, nothing has changed in your own circumstances to warrant changing your investment approach.

Remember, next time you are tempted to make an active decision or to move away from your plan, successful investors are rarely busy investors – just smart ones with lots of free time.

Studies Support Looking Away

Research backs this approach.

In a revealing and now-classic study, researchers presented students with the task of managing a portfolio. The fact that two of the researchers later became Nobel Prize winners might tell you how important this, and similar studies, are viewed.

The students could allocate funds between riskier, higher-return stocks and safer, lower-return bonds. Crucially, the researchers varied how often the students could check their portfolio's performance. This and similar studies confirm the more information you have about the price movements of your portfolio, the worse your results. That feels counter intuitive. Shouldn’t it be that access to more information helps us to be better and smarter?

Well not when that information is infused with emotion in the form of myopic loss aversion. The way the professors describe the reaction, is that losses feel bad approximately twice as much as gains feel good.

The “Goldilocks” Frequency: It’s Okay to Look Away

After wide ranging studies and intensive analysis, some of the most highly credentialled behavioural economists in the world distilled a simple guiding principle for you and your portfolio… don’t look at it!  

Or, to put it another way, it’s okay to look away. If you do, you are likely to be a much happier and more successful investor as a result.

When You Should Check More Often

Though most of us should avoid checking our portfolio frequently, there are select instances when it makes sense to pay closer attention. Usually this will be around major life changes, which might include:

1. Major changes to your life ambitions, or
2. A substantial increase in income, such as from a promotion or new job, or
3. Receiving substantial one-off payment such as an inheritance.

Set It and (Mostly) Forget It

One of the best things you can do as an investor is automate good behaviour. Set up regular contributions or withdrawals if you’re retired, choose a diversified and tax-efficient portfolio, and trust the process. Checking less often will improve your returns by reducing emotional decisions.

An annual review is usually all that is needed to confirm matters such as:

• Are you on track to achieve what you want? This is the most crucial question, and often the most overlooked. Depending on your answer, you may need to adjust your overall strategy or portfolio.  
• Are there now different, better, investments available that should be considered?
• Only if you you’ve automatically rebalanced your portfolio (a feature of nearly all KiwiSaver Schemes and managed funds), are you now too concentrated in one sector or region?

If you have a financial adviser such as the team here at Become Wealth, this process will usually be formally led by them, so there’s even less for you to do!

The Bottom Line: Knowledge is Power, But Over-checking is Pain

“Nobody buys a farm based on whether they think it’s going to rain next year, they buy it because they think it’s a good investment over 10 or 20 years.” – Warren Buffett

A well-structured investment strategy and automatically rebalancing portfolio doesn’t need constant monitoring. At most, an annual deep dive to see if you’re on track will keep you informed without leading to unnecessary stress or bad decisions.

So, take a deep breath, step away from the stock app (application), and go enjoy your life. Your portfolio will thank you for it.

If you’re interested in financial freedom and would like to chat with a trained professional about it, your complimentary, no-obligation consultation is just a booking away.