We are a society collectively afflicted with ADD. In the age of real time stock quotes, round the clock business channels and hopped up stock analysts screaming “buy!” or “sell!” hourly, we have taken what is supposed to be a long-term venture and turned it into a quick and dirty pursuit by constantly wondering if I should buy or sell now.
Is one doing themselves a dis-service by trying to make a decision on our stock portfolio by checking it early and often? I suspect most likely so. I would like to see a study where they separate three groups of investors with the same financial acumen and subjected one group to a constant barrage of information about stocks in their portfolio’ daily vs. another group in which information was only revealed about stocks in their portfolio once a month vs. a third group in which information was only revealed about stocks in their portfolio once a calendar quarterly. Each group would be allowed to make as many or few trades as possible given the respective shots of information they receive.
It would be interesting to see if a slower flow of information actually increased stock performance. At the very least, since the last group is theoretically making decisions based larger gaps in the disclosure of information and assuming that such disclosure elicits a buy, sell or do nothing reaction, one would assume that this group would be less actively trading and, therefore, it would have less transactional costs overall. Since active trading is more costly and an attempt at market timing (often with negative results), at the very least, anything that would promote less active trading on the retail level would be a good first step.
But how often should you check a stock portfolio?
At the very least, I check my stock portfolio once a month when it comes in the mail for the sole purpose of ensuring there has not been unauthorized trades, no one has accessed my account etc. In other words, not to look at the value of my portfolio but to guard against anything unusual (you never know in this day and age and computers do weird things too). Other than that, I am not sure, with an investing horizon of over 20 years, I am doing myself any good, as an investor or for my mental health, by checking my portfolio often.
Take, for example, the stock price of Manulife Financial Corporation (MFC); one of the largest insurance companies in the world and of which I am a shareholder. If you checked the stock ticker at the close of the first trading day of each month this year you would have seen the following (expressed in CDN):
Jan 2: $20.98
Feb 2: $20.45
Mar 2: $11.58
April 1: $15.08
May 1: $20.35
Using that same hypothetical experiment above, if I was exposed to information about MFC daily or monthly including stock price, in February and March, I would have more likely wanted to do something- anything. Do I sell or become a value shopper? If I become a value shopper, how do I know the stock hit bottom? In other words, possessed of an itchy trigger finger, I would have taken action for action’s sake- whether good or bad.
If I was only allowed to access information about MFC once a quarter, if the experiment started in January, I may have done something but if the experiment started in February, I am looking at my stock going sideways in a down economy which would probably mean I do nothing and ride it out, saving me some transaction fees.
In other words, I am not sure if I am making the best or worse decision. I am making a decision because of the constant hit of information coming my way and my natural impulse to take action based on such information. It makes one wonder whether the Internet could be harmful to your stock portfolio?
Anyone care to share how often they check their portfolio?
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