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Checking your account too regularly could backfire.
Key points
- Opening a brokerage account is a smart financial choice that allows you to invest for your future.
- Checking your brokerage account too often can lead to emotional decisions.
- Remember that you are investing for the long term and want to ride out short term dips.
If you want to build wealth, you’ll probably need a brokerage account to be able to invest money. A brokerage account allows you to buy stocks, bonds, ETFs, mutual funds, and other assets that will hopefully generate reasonable returns and put your money to work.
But once you’ve opened a brokerage account and bought investments you believe in, it’s crucial to avoid one key mistake: logging into your account too often to check on the performance of your investments.
Why checking your brokerage account too often can cause you financial problems
Looking at your brokerage account too often can cause problems because it can interfere with your ability to practice the best and most proven investment strategy.
You see, if you want to maximize your chances of success with your investments, you need to carefully research different types of assets you can buy, build a diversified portfolio, and leave your money alone for the long term. By doing this, you don’t have to try to time the market and buy at rock bottom prices, and you significantly reduce the risk of losses compared to high-risk strategies such as day trading.
But if you log into your investing app often and constantly monitor your investment performance, it becomes harder to not react and make bad decisions based on emotion.
Specifically, you might end up selling assets at an inopportune time. The market naturally goes through cycles and accidents can occur and cause the value of your investments to drop. If you see your stocks starting to lose value, it could prompt you to make a fear-based choice and sell because you feel you need to limit your risk of loss. The most likely result of this, however, is that you miss the rally that almost inevitably follows downturns, and you end up turning temporary losses on paper into permanent losses in the real world.
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You might also start to feel like you need to be more active in buying assets, especially if you see some popular stocks performing well. But it can also lead to bad choices if you’re investing just to go with the flow of what others are doing. Often, you won’t notice certain investments increase in value significantly until they’ve already peaked, which could be a recipe for buying big.
How often should you check your brokerage account?
Instead of regularly checking your brokerage account, you should focus on developing a solid investment strategy and identifying assets that you would be happy to own for the long term. Then set up automated investments using dollar cost averaging, allowing you to buy a set amount of each asset at a given time. With this approach you eliminate the problem of trying to time asset purchases perfectly, because at some point there is a good chance that you will buy at the right time and buy a bigger stake when that happens. .
If you’re confident in your investments, you don’t really need to check your account more than once a year or so to rebalance it and make sure you’re still happy with your risk level. If you can’t wait that long, checking your balance every few months should be enough.
Although it may seem counterintuitive, being less practical may ultimately be the best approach. By not checking your balances too often, you’ll be less likely to react to natural fluctuations based on your emotions and make decisions you might regret.