Today’s post is brought to you by DH, aka “Dear Husband,” though I’ve taken to calling him my “BHE” (Best Husband Ever). The timing of checking one’s net worth was a subject we were discussing while on Sabbatical in Colombia, and he decided to put it the why’s and how’s into written form, hoping you all would benefit from his research:
Over our investing life, I’ve “peaked” at my portfolio at various intervals, and I’ve found the sweet spot for when to check on our holdings that works well. It not only saves us money, and time, but it’s also helped us avoid errors, and increased our happiness. Maybe it would work well for you, too.
Early on in our attending lives, I built beautiful, color-coded Office spreadsheets where everything would automatically update with a click of a button. I would look at our portfolio multiple times a day to see what had changed. Fortunately for me, the import function on the spreadsheet eventually ceased to work.
This “loss” actually led to positive changes in our happiness.
Now we only check our portfolio every 6 months. This is when we rebalance and find out about our new balances.
But, you ask, what about tax-loss harvesting? It is simple to set email alerts to notify you if a security you eventually intend to sell falls below a certain percentage so you can pounce on the tax-loss harvesting opportunity.
Then, what about regular purchases in retirement plans? Just set them to automatic re-investment mode. For accounts that insist on manual contributions, many brokerage sites allow customization of the opening page so that when one logs in, it automatically goes to a page that does NOT display the balance, yet still allows you to trade.
(Editor’s note: Please be aware that there are affiliate links in this blog that, if you click, could bring us a commission, but at no extra charge to you.)
Why every 6 months? I remember Edleson’s Value Averaging Edelson’s research showed the “best” interval to take advantage of market ups and downs to be greater than quarterly. The data is old; however, from the early 1990’s, I believe. For us, there were 2 times a year when we would have extra income (before I went to Per Diem status), and we had a clear view of the next 6 month planned expenses. Hence, every 6 months clearly made the most sense for us.
How does this save us money? As the partner “responsible for investing” in our marriage, I began to realize that over time, I was becoming more concerned about short term returns (especially losses). When you only check in on the long term results, the odds increase significantly that your returns will be positive. In fact, I recall studies (from Fidelity) stating the best investors (those with the highest profits) were those who either forgot they had accounts or those who had died.
How does this save time? Honestly, checking multiple times a day wastes oodles of mental energy and that time is better spent on any number of things, like living life, taking a nap, or eating a tasty snack.
(Editor’s note: I wonder when DH actually takes naps? This must be when I’m not around, lol).
How does checking only every six months help me avoid errors? If you’re always thinking you must be “on top of” your portfolio, this leads to an urge to tinker with your holdings. But odds are, the moves are far more likely to be harmful to your bottom line.
How does checking our net worth only every 6 months increase our happiness? **Attention: This is the most important part of this blog post** Experts in behavioral finance have shown with human studies (Kahneman) that a loss feels twice as painful as the happy feeling that comes with a win. With a stock market that typically goes up about 55-60% of the time, the frequent checker is repeatedly crushed in this metric.
Case example: Let’s look at Frequent Checker Charlie (checks 1 x/day) versus his colleague Leave It Be Lisa (checks 1 x/week) who happens to have the exact same investments in the same exact total market funds. It’s been a bit of a volatile week, for instance, let’s say over the past week the market goes up 1% for 3 out of 5 days, but down 1% for 2 of the 5, for an overall gain of 1%.
Let It Be Lisa checks, and she has a 1% gain on the week. She has an overall positive feeling for the week. Life is good! Cheers!
But poor Frequent Checker Charlie. He’s checked every day and even though he’s had 3 positive days (3 days x [1 🙂 per day]=3 🙂 days) as well as a positive return on the week, it’s been more than canceled out from the feelings of the 2 down days (2 days x [2 🙁 ]= 4 🙁 ). Recall that losses are twice as painful. If he’s not careful to look over his weekly return, he’s liable to think it was a down week, as he’s had more negative emotions than positive 🙂 .
This example could be multiplied by several powers when comparing people who check 20 times a day to those who check only once a year. And even more so in a down market. Those who check only one time in a down market get poked once rather than daily (or hourly).
Although not stated above, Leave It Be Lisa had put together a well thought out plan. She doesn’t need to experience angst or doubt continually, nor the second-guessing associated with the no-thought out ahead method of checking multiple times a day in a down market.
The longer I’ve lived, the more I respect behavior finance and realize it is real.
Don’t beat yourself up with negative emotions if you don’t have to do so. Instead, trust the plan.
But what are the possible downside to not checking frequently? Say someone hijacks your account. Solve this by choosing strong, complicated passwords. And by all means, pay attention to your email.
And the best part of only checking twice a year? You can’t name your return data off the tip of your tongue at cocktail parties or sporting events when others are discussing this information. It’s nice to no longer care—thank you behavioral finance. 🙂
Editor’s Note: Overall we became much happier when we switched over to the “only check twice a year” model of finances. Do you do this? If so, what have you found to work, or not work, for you?
(If you would like to follow our journey so we can help you with FIRE strategies and learn the truths we’ve discovered, please sign up as a subscriber. And if you found this post helpful, I’d appreciate it if you please shared it on social media using the button below. Thanks!)
18 thoughts on “Why You’ll Be Happier if You Only Look at Your Portfolio Every Six Months”
You are wise, husband of BC.
I need to follow your lead – so far I can’t help but open Personal Capital at least weekly, although this is a definite improvement from the multiple times a day at first.
What’s the nicotine gum equivalent for portfolio OCD?
DH here: Thank you for the kind words, Crispy Doc!
I know how hard it is not to check when you are in the habit of doing so – I’ve so been there.
For me, it’s clearly better on this side.
Oh, and your “gum” comment will give me something to “chew” on 🙂
I definitely enjoy a hands-off approach at this point. Apparently there was a stock decline towards the end of 2018. Some bloggers were freaking out. It didn’t affect me at all. It takes some experience, knowledge, and/or apathy to reach that level of Zen though. I kept reminding my fellow bloggers you only lost money if you sell those lower priced shares. Don’t realized the losses and you didn’t lose. If you didn’t watch the losses do they exist? Does a tree fall in the woods if there is no one there to see it?
DH here: I recall December of 2018 well, as that was our rebalancing time. We bought a considerable amount of stock at the end of the month because my IPS demanded me to do that. Honestly it was not easy to do as I had no idea how low it would go.
DH. I completely agree. I think it’s important to lay down a solid long-term investment strategy and stick with it. Maybe it’s just me, but the ups and downs just don’t affect me too much knowing I’ve got a long-term plan. And there are too many other things to do to check your portfolio daily, much less to try to time the market or trade constantly.
DH here: Very much agree that a solid plan created when things are calm greatly assists in riding out the inevitable storms. Especially helpful when in print.
It is a very smart system indeed and combat so many behavioral mistakes we typically make when dealing with finance.
If you are playing the long game, which most of us should when planning for retirement, it is wise to look at the short term volatility. Too often we see something going down and we lock on the losses with a panic sale only to see it recover later.
I actually have been checking my portfolio on a bi-monthly basis that coincides with my paycheck. I do this do I know where I can direct my excess money into. It allows me to also take advantage of tax loss harvesting if need be.
DH here: Thanks on your feedback here. Behavioral finance errors are common. Your system here also seems like it would work. If you wanted to spread out checking your portfolio, you likely could automate those actions, no?
The hardest part about investing is taking the deep dive to “learn the language” to lay the foundation of your financial house and then automating away behavioral and emotional bias by “forgetting” almost everything you have learned!
DH here: This is an excellent point. It takes a lot of knowledge as well as experience to determine what actions add value. When one is just learning, it is difficult to know where to focus energies.
Not much different from trying to remember what it was like to not be able to move freely through the German language, culture, and people.
I update my net worth quarterly, which means I check the BALANCE of the accounts quarterly. I almost never actually look into the accounts to see what any individual investment is doing. Once in a while it will happen, every couple of years. I bought stuff I don’t feel the need to check. When I was young, I watched the market every day. Followed stocks I owned everyday. What a waste of my life that was. I never acted on the daily information, but I used up my valuable time to get it. Now I know better. My favorite holding period is forever. I’m going to add this to Fawcett’s Favorites next Monday. Thanks.
Dr. Cory S. Fawcett
Prescription for Financial Success
DH here: Interesting – did you go straight from following your stock prices daily to quarterly checking the balance alone or was it a slower process? How and what was it that caused you to change? Have you noticed differences in how you handle market downturns differently? By the way, thanks for sharing the article – I hope it helps people.