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How Often Should You Monitor Your Investments?

By on September 19, 2011 in Money

How Often Should You Monitor Your Investments?When you have multiple investment accounts ranging from a 401k to a Traditional IRA, you need to keep tabs on the investments inside those accounts. You cannot know if your investment strategy is paying off if you don’t know how your investments have performed.

But there is a fine balance to be maintained. Checking your investment accounts every few hours is a waste of time and energy unless you are doing full-time trading inside your accounts. On the flip side, ignoring your accounts for years is a recipe for disaster. So how often should you monitor your investments?

Why You Should Monitor Your Investments

Monitoring all of your investment accounts can be time consuming process depending on how many accounts you have. Every site requires you to securely log in to check your balance. A few retirement account providers off mobile applications for your smartphone so you can keep tabs on your accounts away from home.

But the time spent monitoring your retirement accounts is well worth it for several reasons:

  • Monitoring investment balance. One of the key reasons to monitor your accounts is to make sure your balance of stock and bond mutual funds does not get too far out of line with your goals. A large run up in stock prices can throw off your asset allocation. Rebalancing your accounts on an annual basis helps you buy low and sell high rather than the opposite.
  • Monitoring closed mutual funds. Your employer’s 401k committee should look at your mutual funds options on a regular basis. If a fund is underperforming or a less expensive fund is available with similar characteristics, many times they will close out your positions in the old fund and automatically invest them in the new fund. This puts your retirement in their hands instead of yours. Keeping tabs on your investments help you know when new funds are coming into your portfolio.

Why You Shouldn’t Constantly Monitor Your Investments

Spending every waking moment fretting over your retirement account balances is counterproductive. You don’t need to check the balances as soon as you wake up. The main reason to avoid constantly looking at your balances is the stock market can be very volatile. If you are constantly watching your balances you are going to see great swings up and quick falls down simply based on normal market movements. However, if you are sitting and watching the ups and downs, your emotions will likely get the best of you. When things are going up, up, up, you will be inclined to throw more money in the market at a time where it might make sense to sell high. Likewise, when things are plummeting you will instinctively want to yank money out of your investments when you should be buying low (instead of selling low).

How Often You Should Monitor Your Investments

Monitoring your investments on an annual or semi-annual basis should be enough to keep a portfolio based on index mutual funds on track. There is no need to look at your accounts on a daily or even a weekly basis. Keeping tabs is important, but being able to focus on other parts of your life is important, too.

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