Stop Checking Your Portfolio Every Day: Here Is What That Could Cost You

Whether in the workplace or at school or in your own home, doing something always feels more productive than doing nothing. And in most of these cases, more activity improves outcomes.

This learned mindset, however, may actually work against investors. Indeed, not only would you be better served with less trading activity, but the seemingly simple act of checking in on your portfolio's daily performance risks undermining your long-term results.

Accept what you can never know

This seems counterintuitive. Merely gathering information does no harm. And were that the simple case, this argument holds water.

Even the most disciplined of investors, however, is subject to the subconscious tricks a daily check-in can play on your mind.

See, the aforementioned affinity for taking action -- any action -- is real. Psychologists call it "action bias," in fact, or the desire to do something when doing nothing is a viable option too. And this subtle, learned urge can be easily fomented by an industry that often makes it feel like opportunities are time-limited; the fact that it's so easy and cheap to trade stocks these days only adds to this bias.

Giving in to this urge too often can be a big problem though. As legendary investor Warren Buffett famously explains, "the stock market is a device for transferring money from the impatient to the patient." In other words, you should make a point of doing less.

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There's plenty of data to support the premise too. As mutual fund company Hartford notes, for instance, over the course of the past 20 years more than 40% of the stock market's biggest daily gains materialized in the middle of a bear market, while more than one-third of its very best days took shape during just the first two months of a new bull market when no one expects it. Missing out on even just some of these winning days can prove catastrophic. In fact, Hartford goes on to say that simply being out of the market during just the best 10 days of the past 30 years would have more than cut your total returns in half.

Connect the dots. As tempting as it may be to avoid steep sell-offs, no one's market timing is consistently good enough to predict when these big days are coming. The long-term risk of not being invested through rough patches is still greater than the temporary risk of just riding out these turbulent periods.

The key, therefore, is not setting yourself up to be lured into not taking unnecessary action in the first place. Not checking in when there's no real reason to check on your portfolio is the first best place to start sidestepping this psychological trap.

By the way, too much tinkering is also why most hedge funds underperform the overall market.

Make it easy to not look

Sure, certainly some investors can take a quick look at how things are shaping up for their portfolio on any given day without feeling they need to respond. They still don't need to though.

The irony? Investors would have more free time, less stress, and a bigger bottom line by being even more passively disinterested.

Index funds make it much easier to muster the confidence needed to embrace this mindset.

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