Checking in on your investments every day? That could be a problem
We get it. You’ve made an investment, you’re super excited – perhaps even a little anxious– and now you’re logging in every day to see if your funds are growing.
With investing apps like Verve Money, it’s easier than ever to get instant information on the status of your portfolio. In fact, a survey by Select and Dynata found that almost half (49%) of surveyed investors were checking their investments’ performance once a day or more. In other words, you’re not alone!
At Verve, it brings us joy to see people caught up in the excitement of their first investment experience, but according to our CEO, Christina Hobbs: “Being engaged is awesome, but checking your investments too often can make you feel like it’s performing worse than it actually is, because you’re more likely to focus on the days that your account makes losses rather than gains”. This can also lead to knee-jerk reactions and impulsive decision-making that prevents you from letting your investment grow over time.
Not sure how often you should be checking your investment, or what to do if you see your balance moving up or down? Then read on.
First, let’s do a quick recap on the difference between investing and having your money in a bank account
Savings accounts with a bank typically offer lower interest returns than are targeted by investors in the sharemarket, but your money is easily accessible and there is minimal risk of losing your principal investment. Typically the money you save in a bank account, is money that you may need day to day access to, or that you may need unexpectedly.
A bank will tell you the amount of interest that they will provide you upfront and typically each month that money will be paid. Even if it’s just a few cents or a few dollars, it can make us feel good.
Investing, on the other hand, can help you work towards reaching your longer-term goals, such as retirement or saving for a house. When you invest your money, it is subject to market fluctuations – that is, you will see days with positive returns and days with negative returns. Despite the ‘volatility’, we invest in assets like shares, property etc. because over the medium to long term, we’re likely to earn greater returns than we would by simply keeping our money in the bank.
So how often should I check my investments?
Because you’re investing for the medium to long term, and because you know in the short term that your investments will go up in value some days and down in value on others, it’s not advisable to be checking in everyday.
In fact, if you’re investing in a diversified portfolio of investments curated by experts, like the Verve Money App, the Australian Government Money Smart website recommends only checking in twice a year. Yup, that’s right, twice a year! The reason:
“Over-tracking may lead to over-trading. This can result in selling when markets fall and not sticking to your investing plan and investing time frame.”
In other words, there’s evidence that people checking their accounts too regularly can lead them to take money out when the markets go down (typically the worst time to remove money from an investment!). Research also shows that the more frequently investors’ monitor their portfolio, the riskier they perceive investing to be. This is known as myopic loss aversion and it can lead to emotional stress and/or changes in the way someone is investing.
So, what should you do instead?
When it comes to investing, patience is key. The longer your money is invested, the more potential it has to grow and earn compound interest, which occurs when you reinvest the investment’s earnings to potentially generate more earnings.
Set a schedule to check your returns, say, once a quarter. This way, you’ll get a more accurate picture of how your investment is doing and you won’t drive yourself crazy with daily updates. In the meantime, keep an eye out for all the email updates we’ll send from Verve about what we’re investing in and what else is going on in the community. This should keep you inspired to keep working towards your goals without overly monitoring your returns.
This article is published by Verve Money Pty Ltd (ABN 71 653 669 366, AFS Representative No. 001294184), a Corporate Authorised Representative of True Oak Investments Ltd (ABN 81 002 558 956; AFSL 238184), as the Manager of Verve Money. A friendly reminder that all the financial information contained in this article is general in nature and does not take into account your personal financial objectives, situation or needs. It’s important to do your own research and consider getting in touch with a professional adviser to access specific information tailored to your unique situation.
You should read the Product Disclosure Statement, Investment Guide, Target Market Determination and Financial Services Guide before making a decision to acquire, hold, or continue to hold, an interest in the Verve Money Fund. Visit www.vervemoney.com.au/documents to view these documents.
Interests in the Verve Money Fund (ARSN 662 622 899) are issued by Melbourne Securities Corporation Limited (ACN 160 326 545, AFSL 428289). When considering financial returns, return of capital is not guaranteed and past performance is not indicative of future performance.