Question: How often should I check my portfolio and what should I be looking for?
--Elaine H., New Orleans
Answer: That’s a rarely asked question, and it’s a shame, because many people check the status of their investments either too frequently or not frequently enough.
Let me explain...
For Beginning Investors
For investors who are just getting going, early and quick gains in a portfolio can make investing seem exciting. And it’s natural to want to check the pulse of your portfolio every night (and some people do it many times a day). But such attention can actually be counter-productive, compelling you to act hastily if your portfolio has lost value for a few days or weeks.
Truth is, early investors should mostly own mutual funds and exchange-traded funds (ETFs) and primarily avoid stocks. That’s because researching and then tracking stocks take a lot of time and experience, something many people lack. And if you do only own funds, you may as well resist the urge to check in daily or even weekly.
You should see these as long-term investments. And if they’ll be in your portfolio for years to come, it’s irrelevant how they did today or yesterday. As a rule of thumb, check in on the portfolio monthly. That’s why brokerages and retirement plan sponsors tend to issue only monthly statements. Anything more would like staring at a tea kettle, waiting for it to boil.
For More Experienced Investors
But once investors have owned mutual funds and ETFs for a few years (and presumably spent that time brushing up on their investor education), the time may be right to start owning individual stocks.
This is when everything changes.
Here's what I mean...
Once you own a specific stock, you need to carve out at least once a week to see if there are any events impacting your investment.
Did a just-released quarterly earnings report indicate trouble ahead?
Did the company recently make a major acquisition that will alter its growth prospects or profit levels?
These are the kinds of issues to track, and it is also helpful to read all of a company’s SEC filings, as companies often seek to hide bad news in these mandatory filings (known as 8-Ks). Companies usually only issue press releases when there is good news to share.
If you have the time, and you consider yourself an active investor, a weekly portfolio check-up isn’t even enough. Experienced investors know that they need to spend at least a few minutes every morning and every evening tracking the key issues. Some folks even try to stay abreast of their investments during lunch time or other breaks.
And remember, just because you start checking up on your investments more frequently, it doesn’t mean you should be an active trader. The market can swing wildly from week to week, pushing your portfolio up or down in tandem. That doesn’t mean your stocks are in trouble, but is a sign that you should be paying close attention.
There isn’t a hard-and-fast rule about how often you need to monitor your investments. Understand that if you own mutual funds, ETFs or a handful of blue chip stocks such as IBM (NYSE: IBM) or GE (NYSE: GE), then it’s wiser to resist the urge to keep tracking their progress too frequently.
Then again, as your investment portfolio grows in complexity, you must spend the time to know your investments inside and out. If you don’t have the time or inclination to do so, then keep it simple with funds and only the most stable stocks.