Generating Alpha With Behavioural Edge

In today’s world, technology allows us to check our investments with ease. While it’s tempting to keep a close eye on your portfolio every day, this might not be of any benefit to you. Constantly watching the stock market’s ups and downs can lead to making decisions based on emotions, which can mess up your long-term financial plans. Let’s explore why it’s better to avoid checking your portfolio daily if you want to grow your wealth.

The stock market is naturally unpredictable, and its frequent changes can make you react emotionally. For instance, seeing a big drop in the market might make you want to sell your investments quickly to avoid more loss. This often means you end up confirming your losses instead of waiting for a possible recovery. Likewise, if the market goes up, you might be tempted to buy more at high prices, which can disrupt your planned investing strategy and lower your return outcome.

Checking your portfolio every day also makes you focus too much on short-term changes instead of your long-term financial goals. This happens because people usually feel the pain of losses more than the joy of gains, making even small losses seem worse than they are. This focus can lead you to make bad choices that harm your long-term financial health. Moreover, spending too much time worrying about your investments every day can distract you from other important things like your job, hobbies, or spending time with your family.

Constantly monitoring your investments can also make you feel stressed and anxious. Besides, checking your investments all the time doesn’t actually make them grow faster. It can cause you to trade too much, which means paying more in fees and taxes. It also interrupts the growth that comes from leaving your investments to increase in value over time.

It’s important to remember that the ups and downs of the market can actually be good for long-term investors. For those who invest regularly through SIPs (Systematic Investment Plans), a drop in the market means you can buy more for less money, which allows you to average the buying price; thus it will lead to better returns when the market goes up again. Studies show that sticking through these rough times can lead to much better returns after many years.

Patience is key when navigating market volatility. Investors who refrain from constant scrutiny often avoid impulsive decisions triggered by short-lived market swings, preserving their long-term strategy. Embracing a calm, measured approach not only minimizes stress but also encourages disciplined investing. By committing to regular reviews and strategic planning, you maintain focus on your broader financial goals, thereby strengthening your portfolio’s resilience during both turbulent and prosperous market conditions consistently.

Instead of looking at your portfolio every day, a better approach is to check it at set times, like every few months. This helps you stay informed without getting too caught up in the daily movements of the market. Keeping your eyes on your long-term goals and trusting a well-rounded investment strategy helps make sure that short-term changes don’t throw off your main financial plans.

Similarly, talking with a financial advisor regularly (once in a few months) can help keep your investments in line with your goals. Also, using your time to learn more about the financial markets and investment strategies is a smarter and less stressful use of your time than worrying about daily changes in your portfolio.

In summary, while it might seem responsible to monitor your portfolio frequently, it can lead to emotional decisions, a short-term focus, increased stress, without necessarily improving returns. Successful investing requires patience, discipline, and a focus on long-term goals rather than the daily fluctuations of the market.

Disclaimer: The Views are Personal and not a part of the Outlook Money Editorial Feature

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