How Often Should We Check Our Investment Accounts

“They say a watched pot won't ever boil. Well I closed my eyes and nothing changed; Just some water getting hotter in the flames.” — “Neighborhood #4 (7 Kettles)” as performed by Arcade Fire

How often should we check our investment accounts? 

This question resonated with me recently when I read an article which suggested that young investors should only look at their 401(k) balance on their first day of plan participation and then again at retirement. That way they wouldn’t fiddle with their investments too much and would be amazed at the growth in their account over their career.

While that’s wildly unrealistic, especially because most people will likely change jobs and roll over retirement funds many times in their career, the concept has merit. 

Still, most of us are going to take a gander at our balance every once in a while. But how often is too often?

The answer largely depends on your distance from retirement.

If you’re 32, you have lots of time for your investments to rebound from losses and downside protection probably isn’t nearly as important to you as is growth. So a "set-it-and-forget-it" approach with a more aggressive investment allocation may work well for you. In fact, young investors with smaller balances who are socking away money every paycheck may hope for a prolonged downturn in stock prices so they can load up on shares over time. 

If you’re only a few years away from retirement, though, it may make sense to check your investments more frequently to see how well your portfolio weathered a recent market downturn. Not necessarily to make any major changes; that’s often the worst time to make a big strategy change. But if the stock market is down 20% over a period of time and your portfolio is down by only half that, you are likely invested in a way that has provided some downside protection. If your portfolio is down 20% or more, you may want to consider a more conservative allocation if and when your investments recover value. 

As we approach and enter retirement, maintaining more stable investment balances becomes far more important than it was a decade before. Large losses early in retirement dramatically lower the odds of lifelong retirement success, even more so than large drops many years into retirement. This somewhat counterintuitive phenomenon is known as the “Sequence of Returns Risk” and is a major consideration for most soon-to-be and recent retirees. Reducing this risk with periodic rebalancing often makes sense for those approaching the finish line at work.

One thing that does not work is constant monitoring. Checking our investments daily is like pulling our crops out of the ground each morning to see how much they’ve grown overnight. 

Margaret R. McDowell, ChFC®, AIF®, author of the syndicated economic column “Arbor Outlook,” is the founder of Arbor Wealth Management, LLC, (850.608.6121 – www.arborwealth.net), a fiduciary, “fee-only” registered investment advisory firm located near Sandestin. This column should not be considered personalized investment advice and provides no assurance that any specific strategy or investment will be suitable or profitable for an investor.