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Why We Shouldn’t Check Our Portfolios Daily

It’s common for investors in the stock market to check their portfolios almost daily. In fact, I’ll dare to wager that there’ll be an over whelming majority who knows exactly where their portfolio is almost every day.

The thing is, fixing our eyes on the stock market’s daily gyrations in a bid to know the precise value of our portfolio at any one time is pointless and can even make us unhappy. Why? It’s because as humans, we have the tendency to feel the pain of loss a lot more than the joy of an equivalent unit of gain. In other words, we suffer from loss aversion.

Since the start of 1988, the Straits Times Index (SGX: ^STI) has climbed by 280% from 833 points to 3,161 today. So, for an investor who had theoretically invested in the index back in the day (index trackers like the SPDR STI ETF (SGX: E3S) and Nikko AM Singapore STI ETF (SGX: G3B), both of which mimics the STI’s movement, did not exist back then) and who only bothers to check his portfolio once every 25 years, he’ll be pretty satisfied with the near quadrupling of his money.

But, if he had checked his portfolio at different intervals of time, he’ll likely feel very differently about his investments. From 1988 till today, the STI has:

  • Clocked daily losses 48% of the time
  • Clocked monthly losses 43.6% of the time
  • Clocked annual losses only 40% of the time

Because we feel losses more painfully than gains, anytime there are a greater number of days with gains as compared to days with losses, it would make us feel a lot better.

It might not seem significant to harp on the point about making oneself feel better psychologically, but it actually is important.

Consider an investor who checks his portfolio daily. When he sees red almost as often as he sees green, he’ll feel a lot more anguish and might just sell out, thereby losing the chance to partake in the wealth-building capabilities of the stock market. It gets even worse during times like these, when the market’s moving down more often than up lately.

More importantly, checking stock prices daily would mean that we’ve missed the point entirely. As long-term investors, we want to focus on the business, not the stock counter. If need be, let’s fret about how the business is doing rather not what the stock’s doing.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chong Ser Jing doesn’t own shares in any companies mentioned.