How often should I look at my investment portfolio?

I’ve seen all kinds of behaviors when it comes to how people look at their investment portfolios. There are the people who log into their online account in the morning and check every half hour to see how their portfolio is moving with the market. There are the people who are so nervous to see what their portfolio is doing that they crack open their monthly statement when it arrives in the mail, sneak a peek at the total, and then throw it in a drawer because they don’t want to dig into what’s really going on. And yes, there are some people who don’t even open those statements because, for one reason or another, they just don’t care.

So what’s the right answer when it comes to the frequency at which you check your portfolio?

I think there’s actually a more important question that comes before asking how often you should be looking at your investments.

Why do you want to look at your investments?

When you make an investment, you have to invest with three pieces of information in mind:

      • What are you buying when you make that investment?
      • What goal are you trying to accomplish when you make that investment?
      • Why is this particular choice the best one to accomplish that goal?

If you can’t answer those three questions prior to making an investment decision, you probably shouldn’t have made that decision in the first place. For example, you might know that you’re buying common stock when you buy an S&P 500 ETF, but if your goal for that investment is to pay for your child’s freshman year tuition next fall, you’ve answered the first two questions. However, you probably don’t have a satisfactory answer for why that investment is the most appropriate and the best one for that particular goal. Likewise, you could buy a stock because you see it has a high dividend, but if you don’t understand that dividends aren’t guaranteed and you are depending on that dividend for income, you may find that you haven’t answered the first question well enough.

The reason why these questions need to be asked when you initially invest is so that you can revisit them as both you and your portfolio age. Why? Because the specifics of an investment could change. Because your specific goals could change. And because the combination of these factors could mean that an investment’s fit for your specific goal may change as well. The purpose of looking at your investments needs to be to work through a process-driven method that allows you to evaluate whether the pieces of your portfolio are still the best fit for what you are trying to accomplish. These questions help to build that process for you.

So with that in mind, let’s look back at the initial question – how often should you look at your portfolio?

 

We have three questions to answer in our basic process above.

The question of “What are you buying” is one that likely doesn’t change on a daily basis. If you bought shares of Company X yesterday, your reasons for doing so will probably not change all that much tomorrow. But there are cases where you need to update your thinking. Big management changes, new products, product cancellations, earnings reports – these are all key developments that may change the idea of what you actually own. Maybe you were buying Company X because you loved the management team and they went to a new startup. That’s a reason to re-examine the position. So your individual positions need to be looked at when there are fundamental changes that can affect the valuation of those positions.

The second question in your process relates to your goals. A good starting point for the answer here is that whenever you have a goal that changes, you need to re-evaluate your investments. If you move up the timing for buying a house by a year, you need to look at your investments. If you decide you no longer need a car next year, you need to look at your investments. And you probably should examine your goals at least once a year to begin with in order to see if they’re still reasonable and are actually things you still want. You have to take an active role in deciding what you want to prioritize financially.

And lastly, we come to our third question – why are your investments best-suited for your goals? If you are looking at your portfolio based on changes in either your goals or your investments, you’re going to be answering this question anyways. It’s part of the evaluation process you do when you see changes happening on either of those fronts.

Notice what’s lacking here. There’s no need to check your portfolio on a daily basis. There’s no need to check it when things go way up or way down in a given week. You can do those things if you’d like, but by focusing on the specific needs you have in order to accomplish your goals and meaningful changes in a company, you can save yourself a lot of headache and time spent staring at a screen. Investments are going to move on a daily basis. Sometimes, in highly volatile markets, those moves may cancel themselves out in a span of a day or a week if investors conclude that even with all of that volatility, nothing meaningful changed. But for your investments, the key focus needs to be on figuring out what you really own, what you’re trying to accomplish with that investment, and whether the original fit between those two concepts is still there. Everything else is optional.