finweek

Why you should check your portfolio values less frequently in 2020

Investing is tough for several reasons, but perhaps the thing that makes it the hardest is the absolute and immediate scorecard, which is a share’s price. 

Prices are updating all day and in real time. You’re able to see exactly how you’re doing every minute of every day. Is that share you bought up, or down in the last five minutes? 

Over the last week? 

Since you bought it? 

This can rattle your brain, especially because you’re investing for the long term, but judging yourself on very short-term performance. 

Aside from sport, no other industry has this level of immediate feedback. 

I remember when I had a corporate job, and once a year there would be a performance review. 

Firstly, it was an annual event and secondly the process was deeply vague. 

Sure, your line manager told you what you were doing well or poorly, and you’d end up with a rating. But it was totally abstract and, frankly, largely meaningless. 

Either you got fired or you didn’t. 

And if you could stay on, you got a bonus that was either large or small, depending on your performance. 

But it was more random than a science.

When investing, you need to find a process that enables you to manage the constant feedback loop you get from the market on your long-term investments. 

Generally, the best way to do this is to simply stop watching.

Simply put, stop logging into your investment account daily, or even weekly. 

At most do a monthly check or, if you can manage it, make it quarterly. 

Even though my job requires me to consistently be checking the markets during the day, I largely ignore my actual portfolio. 

Sure, I know what I own and can’t avoid checking those stocks, but I stay away from the actual portfolio page that displays current prices, and the resulting profits or losses, as far as possible.

I am not suggesting that you abandon your investments. 

You need to check results and other important announcements as and when they are published. 

But you can set alerts for Sens announcements for shares you own or are monitoring for a potential investment. 

You can even set price alerts for stocks that you’re monitoring, freeing you up to only respond as and when it’s required.

The key point is that in the short term, share prices will do crazy things, but in the long run the fundamentals will rule, and prices will reflect those fundamentals. 

But this is a hard fact to internalise when prices are falling.

There are also hacks you can out in place that will help you emotionally, and one of these is staggering your buying. 

A word of caution: Only buy staggered if you’re still able to get the effective brokerage rate.

Many brokers have minimums, which means a small trade can end up costing a fortune in fees. 

If the fees work, then stagger either by price or by time. 

With regards to staggered buying according to price, you would buy now, and place other buy orders lower down the price curve. 

The real risk for this way of buying is that the stocks’ prices will move higher, and the you end up owning only a small slice of your originally intended number of stocks. 

When you buy in a staggered way over time, you decide to buy some shares now and in frequent intervals, such as weekly, monthly or quarterly thereafter. 

Sure, you may pay more for the later purchases, but then your initial purchase would also have moved higher. 

If it’s lower, you’re getting the better price.

It is also important to keep an eye on your benchmark. 

If your portfolio is looking horrid, ask yourself how your benchmark is doing. 

You could be down a lot, but not as badly as the benchmark – and beating the benchmark is what investing is about. 

Otherwise you should be buying exchange traded funds.

Make it a priority for 2020 to check your portfolio values less frequently – remember that I’m talking about long-term investing here. 

Where you are trading, your trades need to be monitored in real time.

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