Although many investors understand the importance of long-term investing, it is difficult to keep your emotions in check.
Because even if you say you’re a long-term investor and you check your portfolio every day, sometimes multiple times a day, you’re not really operating with a long-term mindset at that point. You react to short-term price movements even if you tell yourself you don’t.
And that’s where things can start messing with your emotions.
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Why checking your portfolio too often can be harmful
Seeing green can feel positive and affirming, like you’ve made the right decision. However, when your stocks fall and you see red, even if it’s only down a few percent and for no real reason, it can start to sow doubt. You may even wonder if you missed something, if you should have waited to invest, or if you should have tried to “do something.”
However, in almost all cases, especially in the short term, nothing actually changed about the company from the moment you decided to buy.
Stocks can move several percent in a day, and absolutely nothing has changed in their long-term earnings power. That is not unusual in the market. However, when you get into the habit of checking stock prices daily, you may start to attach emotion to that movement.
And sometimes that emotion is not always immediately visible. You may not really panic when the stock drops 5%. But that straw can still linger in the back of your mind and cause doubt.
So when stocks eventually recover and turn positive again, instead of remaining disciplined, you might sell to “lock in” gains for fear of losing those gains. Because for most investors, the fear of loss is often stronger than the excitement of more potential upside.
The strange thing is that most of us know this. We know it every day inconstancy It doesn’t matter whether we invest for the long term.
So why do we constantly check our portfolios every day?
Even though most investors know that it is essential to invest for the long term, many cannot resist checking their portfolios daily because money is an emotional subject.
We all work hard for our money, so when we see it fluctuate in value it can feel personal. So even though it’s understandable and very common to feel this way, it’s still something we all have to deal with.
The key for investors to remember is that making sure you buy high quality stocks that you understand and really believe in, whether they are defensive dividend stocks like Fortis or a long-term growth stock such as Dollaramathe statement should not change because the price fell for a week or even a month.
That is the point of long-term investing. It reduces short-term volatility so you don’t have to be right every day; you just have to be right in the long run.
But if you check it daily, you start judging success by the current price rather than by whether the company is performing well, and that’s the biggest pitfall.
Think about it this way: If you owned a small business, you wouldn’t have to worry about the value of your business every day. Do you want to know whether turnover is growing? Are the margins stable? Is management allocating capital appropriately?
Those are the things that will have the biggest impact on the share value in the long term. The stock price at 10:37 am on a random Tuesday does not.
Often the investors who tend to build the most wealth are usually the ones who do the least. They do the research upfront and buy strong companies, then hold them with confidence, refusing to let daily market movements influence their long-term conviction in those companies.
That doesn’t mean you should ignore your wallet forever. It means understanding the difference between monitoring your company’s activities and obsessing over the daily stock price.
Long-term investing is simple in theory. The hardest part is managing yourself. So the next time you find yourself looking at your portfolio, ask yourself if anything has actually changed.
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