Don’t check your stocks every day

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Don’t be a moron. If you check your stocks every day and worry about the daily variations in your net worth, you’re being dumb.

Now, if you enjoy reading Smart Money and Forbes and watching chairs being thrown on CNBC, then by all means–go for it as a hobby. But remember, their “secret stock ideas” are designed to sell copies. And the pundits? Their stock picks are usually no better than chance.

Most long-term investors don’t need to check on their investments every day. The daily changes in stocks are almost always noise, plain and simple, and few 30-year returns were determined by the news of one day. In fact, I read a quote from the president of ETrade saying how, a few years ago, almost half his customers logged in once a day to check their stocks. “That’s crazy,” he basically said, noting that most people don’t need anywhere near that level of activity. (If you can find this quote, please let me know.)

As with most things, it’s not about being sexy, it’s about doing enough to get where you want to go. Wow, you have 450 personal-finance magazine subscriptions! You must really know what you’re talking about!! The same goes for blogs. Do you seriously think that the person reading like 50 personal-finance blogs is actually doing anything?

Give me a break and keep it simple: You need to build up a good infrastructure so you know what kind of asset allocation you want (stocks, funds, real estate, whatever), and then make sure you’re roughly on target. You need to occasionally monitor your investments to see how they’re doing. And you may want to set up automatic alerts through your broker/Google news to keep you informed on major news in the company. How often should you manually check on things? Probably every few months, with a major review every year. But not every day.

Relax. Once you get set up right, investing is easier than you think. Last month, I spend a few hours a month looking after my investments. That’s less time than I spent watching Law & Order reruns yesterday.

To post this image on your blog, MySpace, etc:

See Part 1, Part 2, Part 3, and Part 4 of this series.

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14 Comments

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  1. The key to this is as you said, set up news alerts to keep an eye on the business and the sector. Flying blind is as nerve-wracking as watching a live ticker. You at least need to keep on top of the goings on so you’re not bit by another Enron or Tyco.

  2. I’m a mid-term trader. While I have protective stops in place (and haven’t lost “a lot” in a long while, vs. recent losses you described that way), I check stocks for price movement. It’s not worry. And calling price and volume activity “noise” is a little crazy. Sometimes you get clear indications that stocks are breaking down. Wanna take the loss so you can watch more t.v.?

    I read 50 investment-oriented blogs. Today I put $20,000 into a CD at 5.31%. Yesterday I sold JNJ, crystalizing a $150 gain *based on what I saw in daily activity*. I earn $12/day on CD’s and money market funds. I hold one stock now (AMGN). Information *and knowledge* are keys. And investment-oriented blogs are very good sources for both fundamental and timely information.

    Some people seek a hands-off investment profile. Others don’t. Am I doing nothing? I’m probably tanning your hide, kid.

    I don’t own a televison.

  3. Anyway,it is a new way in investment. Maybe it is useful to someones who are always busy with their own work.:)

  4. I think what you said is exactly meaningful to me.
    I am not very patient and I sometimes are eager to know the results,which sometimes get me into trouble.
    I should learn a lesson from this.

  5. Actually, I seem to remember someone telling me that missing the big days can have a huge impact ;-) http://www.iwillteachyoutoberich.com/archives/2006/08/stocks_are_down_what_to_do.html

  6. I think that checking stocks continually is driven by whatever motivates people to check their RSS feeds, email, phone messages, etc. If it’s possible for something to happen, then it’s theoretically worth seeing if something happened.

    It’s not realistically worth it. I went on vacation for a week and just the thought of coming back to all the things I usually keep tabs on made me anxious.

  7. Tark, I think you missed the point of the article you referenced.

    Ramit was advocating that we not dump stocks simply because they show a decline, even a large one. Part of the reasoning behind this was that if you simply dump your stocks when they’re low, chances are you will miss some of the biggest increase days. The article points out that over a 10 year period, missing out on the 5 biggest days would have reduced your return by 22.65%.

    Monitoring your stock portfolio balances every day isn’t going to help you spot the “big days”. So, I don’t think his advice is contradictory.

  8. This may have been covered before…. But besides IWTYTBR, what blogs are people reading?

  9. This is great advice. I used to be someone who checked my stocks on an almost hourly basis – and it made me a worse investor. Now, I trust my research and my gut and stick with my trades. Obviously, if something unexpected happens, you have to react, but other than that, you should be in it for the long term.

  10. I do watch my investments nearly daily. But I don’t get freaked out by what they are or are not doing on a daily basis. I review my portfolio quarterly and don’t make changes more frequent than that. I may not even make changes on a quarterly basis. But I find it interesting to watch on a near daily basis. It doesn’t bother me or make me anxious.

    Are you saying that it is wrong to watch it daily or that it is only wrong to take action based on daily observations?

  11. I probably check my stocks twice a day – not because I am always on the verge of buying or selling something, but just because I enjoy saying “ooh, I’m rich!” or “sh*t, I’m poor!” to my laptop. My laptop likes the extra conversation, too.

    But seriously, it’s not that bad to just stay on top of your stocks. The whole process takes me maybe 30 seconds a day – I just click on my bookmarked Yahoo! Finance profile and see what’s out there. Plus if you have a portfolio with Yahoo! they automatically ferret out financial news articles that mention your companies, so I can take another 10 seconds to check if any of the headlines seem worth looking into.

    But as you said, I follow my investments with this level of interest because I view it as a hobby as well as as an investment. Still, while it’s not as sound a strategy as long-term buy-and-hold investing, money can be made (and massively lost, of course) in shorter term stock buying. I made 25% in about a month this summer riding a wave of hype with Harris & Harris (TINY) and then selling it when I thought it had gone up too much too quickly – info I guessed at from my compulsive daily stock-checking.

  12. You know why he said that the users that check their stocks everyday on their system are crazy? Because he makes more money money from inactivity fees. He wants them to forget and get charged 40 dollars every quarter.

  13. I’m 16 and want to know when is the best time to buy and sell stocks? It’s kind of a smart gamble but I hear that a lot of the people who stick to a company, make wise decisions, and are patience, tend to get the most out of the stock market.

  14. Just go with companies you think will do well and stick with them and build up over time, the HUGE players in this game are rock solid stable throughout the most insane economic insanity. Fear is what screws so many of us over. That being said if you see a stock that just sucks, don’t be scared to just sell. Don’t try wasting time saving a stock that’s going down the tubes by compensating your cash and buying more. Decide in advance how much you’re willing to lose and go with that. If its a small amount and your just getting started who cares, if its huge then set yourself protection points that you can live with. The beauty of stocks even though it is kind of a form of gambling is that you can protect yourself with limits, you don’t have to lose it all – buy you can make endless amounts of money.