A few weeks ago, Steve (one of our readers) commented that Personal Capital might not be a good tool because it encourages you to check on your portfolio too often. For those of you who haven’t tried it, Personal Capital is an account aggregator site. It can pull the data from all your various accounts to show everything in one cohesive picture. This is very useful for me because I was updating everything manually in an excel spreadsheet previously. Personal Capital also can help you keep tabs on your asset allocation, figure out what sectors you’re invested in, and check how much fee you’re paying in your 401k. They also provide portfolio management service for a fee. This last one is optional and I’m not using the service. I enjoy logging on to Personal Capital and I find the tools helpful, but Steve has a point about checking your portfolio too often. Here is his entire comment.
My own thought is that one of the great weaknesses of sites like Personal Capital, Mint, LearnVest, etc. is that they draw too much attention to day-to-day changes in one’s investment portfolio. Often, when people see the market tanking, and the value of their portfolio falling, they do exactly the wrong things which is to sell equities, and go into cash. When they see the market go up, they rush in and buy—again, exactly the wrong thing. Most people would be better off just establishing an appropriate portfolio allocation, making regular investments consistent with that allocation, re-balancing once a year, but otherwise forgetting about the daily valuation of their portfolio. If you really need to worry about what the value of your portfolio is on a day-to-day basis, you shouldn’t be investing in anything but cash or cash-equivalent investments. The tools are neat, but for the average investor, I am not convinced they are helpful in terms of increasing returns.
Steve is absolutely correct. The average investor should not obsess over the value of their portfolio every single day. You really can’t do anything about the fluctuation and it’s an easy way to give yourself an ulcer. Many investors sold low and bought high during the recent financial crisis because they got too anxious about the big drop in their investments. However, not all investors are alike.
I was a daily checker
I checked my portfolio almost every single day from 2006 until July 2012. It was part of my morning routine when I got to work. I’d quickly check email and then update my net worth spreadsheet. If I was busy, then I’d update it a bit later in the day. It was easy to carve out a few minutes to do this because I spent all day in front of a computer. I think I was tracking our portfolio so closely because I didn’t like my job and updating the spreadsheet felt a little escape. I don’t think I was so obsessive prior to 2006.
Anyway, I didn’t panic sell at any point during the last recession. Our net worth dropped over 25% during that period, but we just kept investing. Having been through the tough dot com bubble, I knew the stock market should recover someday. The best thing an investor can do is to add as much money as you can during those down years and that’s what we did.
Once I left my job and no longer spend all day in front of the computer, I check our portfolio much less often. These days I check once or twice a week and update my trusty old net worth spreadsheet about once a month.
I guess it really depends on your temperament. If you can handle volatility, then it doesn’t really matter how often you check your portfolio. On the other hand, if you’re prone to making emotional decisions, then you probably shouldn’t check your portfolio very often.
In conclusion, checking your portfolio every day isn’t the right move for the average investor. However, I don’t think the readers of this blog are average investors. We have long term goals in mind and we know the best time to buy stocks is during the bear markets. I still like Personal Investor and it is a useful tool for me. You just have to know yourself and not misuse it.
How often do you check your portfolio? Are you as obsessive with it like I was?
Disclosure: We may get a commission if you sign up with Personal Capital through the links on this site. This probably colors my view a bit. I do log on once or twice a week and it is one of my go-to sites. I genuinely find the tools useful. Your mileage may vary, of course.
Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects across the USA so check them out!
Joe also highly recommends Personal Capital for DIY investors. They have many useful tools that will help you reach financial independence.