How Taking a Break from Checking Your Portfolio Can Help with Returns

With smartphones and tablets and 24-hour financial news channels making stock market data instantaneously available, many investors spend a lot of time monitoring their portfolios’ every movement – too much time, says Validea CEO John P. Reese. Reese says many investors would be better served by looking at their investments less often and taking a long term perspective.

“The truth is that short-term fluctuations in asset prices really aren’t that meaningful,” Reese writes in his latest Seeking Alpha column. “In fact, there is evidence that paying a lot of attention to those movements doesn’t make you a better, more conscientious investor; it actually hurts you over the long haul. In an article written for the American Association of Individual Investors a few years back, Mark Hulbert noted that, ‘According to behavioral finance researchers, constantly looking at how your portfolio is performing is not a benign act. It leads you to focus more of your attention on the short term than you would otherwise, leading you in turn to miss the veritable forest for the trees.'”

Reese says that, in reality, you don’t need to beat the market every day to produce great returns. “In fact,” he says, “you don’t even have to come close.” He looks at the percentage of individual days his top-performing “Guru Strategy” portfolios have made money over the long haul — and the percentage is lower than you might think.

“Portfolios with exceptional performance over the long term still have plenty of bad days,” Reese says. “In fact … they can have nearly as many bad days as they have good days. What’s more, some of the biggest up days come after a very bad day (or a few), as investors realize they’ve overreacted to the downside. Bailing after the bad days can thus really hurt, because you don’t get those bounce-back gains.”

What matters are not day-to-day price movements, but the fundamentals and financials of the companies in your portfolio, Reese says. He looks at a handful of stocks that his Guru Strategies like because of their fundamentals and financials. Among them: Banc of California (BANC).