Why Checking Your Investments Often is Painful
by Marcio Silveira, CFA® , CFP®
Are you losing sleep over your investments? Do you keep checking your accounts with mobile apps? Do you follow the financial news daily? If you answered “yes” to the questions above, you could significantly improve your wellbeing by merely checking your investments less often.
You will feel a lot better, and most likely, your money will also grow faster. Why is that? The misery associated with checking investments too often comes from a well-documented behavioral bias – loss aversion. It essentially states that losses are more painful than gains are pleasurable. Loss aversion is foundational of Prospect Theory, which was proposed by Daniel Kahneman and Amos Tversky in the 1979. Daniel Kahneman later won the Nobel Prize in Economics for it. It also started the fields of Behavioral Economics and Finance. Loss aversion is, in fact, a manifestation of a more profound psychological effect known as Negativity Bias.
We all have a natural tendency to focus more attention on bad things than good ones. In human psychology, it is pretty safe to say that “Bad is Stronger Than Good.” When it comes to gains and losses of money, what is the strength of this effect? The answer is that losses are about twice more psychologically painful than gains are pleasurable for the same amount of money. So, one may ask: If people are so much more miserable when they lose, why do they invest? If the answer is that if you wait long enough, you rarely lose.
Historically there was no 20 year period (or longer) that the US stock market had a negative rate of return. For investors who can afford to wait long enough, investing has always been a positive experience in the United States. It all changes when you look at daily ups and downs. There is essentially the same chance of an up day to a down day. It is like a coin flip, but not exactly. The probability of a profit has a slight edge, about 53% of the days have experienced gain. This slight edge over the long term creates the effect of no recorded 20-year loss. Still, it means that the net negative feeling of daily checking your investment account is real. The more an investor checks, the worse she will feel. One still experiences a net negative feeling when reviewing investments with monthly frequency. It flips to a positive experience with quarterly portfolio reviews because about 70% of quarters have experienced gain in the US stock market. So, for an investor that checks the accounts every time a quarterly statement arrives, the experience will tend to be positive. Incidentally, investment companies typically send quarterly reports to clients. The maximization of the positive feeling would suggest checking investment accounts very infrequently (once a year or even less).
Doing this is probably not very sensible because there is always a chance that there is a mistake or problem with one’s investments that would require action. So, in my opinion, daily check-ins are not a wise approach. Instead, focus on quarterly statement reviews to make sure your investments are on the right course.
Frequently Asked Questions About Checking Your Investments Too Often
Is checking your investments every day bad for your mental health?
For many investors, yes. Frequently checking investment accounts can increase stress, anxiety, and emotional decision-making, especially during market volatility. Daily monitoring often magnifies short-term losses and negative emotions.
Why do I feel anxious when the stock market drops?
Many investors experience anxiety because of a behavioral finance concept called loss aversion, which suggests that financial losses feel significantly more painful than gains feel rewarding. This emotional response is a normal part of human psychology.
What is loss aversion in investing?
Loss aversion is a behavioral economics principle showing that people tend to feel the pain of losses more strongly than the pleasure of equivalent gains. This can lead investors to panic, overreact, or make emotional financial decisions during market downturns.
What is Prospect Theory?
Prospect Theory is a behavioral economics theory developed by Daniel Kahneman and Amos Tversky explaining how people evaluate risk, gains, and losses when making financial decisions.
Why do investors panic during market volatility?
Market volatility can trigger negativity bias and loss aversion, causing investors to focus more heavily on short-term losses rather than long-term investment growth and historical market performance.
How often should I check my investment accounts?
Many financial professionals recommend reviewing investments quarterly rather than daily. Quarterly reviews can help investors stay informed without becoming emotionally reactive to short-term market fluctuations.
Is it normal for the stock market to go up and down daily?
Yes. Daily market fluctuations are completely normal. Historically, the stock market has experienced both gains and losses regularly in the short term, even while trending upward over long periods.
Has the U.S. stock market historically recovered over time?
Historically, long-term investing in the U.S. stock market has generally produced positive returns over extended time periods, despite short-term volatility and temporary downturns.
Why does long-term investing matter?
Long-term investing helps reduce the impact of short-term market volatility and gives investments more time to benefit from compound growth and historical market trends.
Can checking investments too often hurt investment performance?
Yes. Frequent account monitoring can increase emotional reactions and lead to impulsive decisions like panic selling, market timing, or abandoning long-term investment strategies.
What is negativity bias in finance?
Negativity bias is the psychological tendency to focus more strongly on negative events than positive ones. In investing, this often causes investors to pay more attention to losses than gains.
Should I stop following financial news every day?
For some investors, reducing exposure to constant financial news and market headlines can help lower stress and improve long-term investing discipline, especially during volatile periods.
What is the best mindset for long-term investors?
Successful long-term investors often focus on patience, diversification, consistent investing, and avoiding emotional reactions to short-term market movements.
How can I reduce investment anxiety?
Creating a long-term financial plan, limiting how often you check your accounts, working with a trusted financial advisor, and understanding normal market behavior can all help reduce investment-related stress.
Why do investment companies send quarterly statements?
Quarterly reporting aligns with longer-term investment evaluation periods and may help investors avoid the emotional impact of reacting to daily market changes.
