Paying too much attention to your investments (more than once per quarter) costs more than just your time:
- Make you more risk-averse.
- The shorter the time the returns are generated from, the less risk investors are willing to take.
- You’ll see loss 50% of the time if you check performance daily, 25% if one a year, 1% if 7 years.
- Mislead about future return.
- Knowing which stocks performed the best last month won’t tell you which ones will perform the best this month.
- Even professionals can get caught in this trap.
- Increase your risk of performance chasing, which could reduce your returns.
- Past performance is not necessarily indicative of future results.
- Performance chasing could cost an investor between 2 to 4% per year.
- Make you unhappy.
- We tend to feel losses more powerfully than we feel gains.
- Market losses are the one constant that don’t change over time, meaning you’ll see losses most of the time.
Next time, think twice before you feel the urge to check on your performance!