Don’t Dwell on Daily Market Swings

Suzanna de Baca -- Expert Business Source, 10/29/2008 9:44:00 AM

In a volatile economy, you can torture yourself by checking your 401(k) or brokerage account balance several times a day. Here’s a solution: stop looking at it all the time.

Unless you are a professional investor or financial advisor, or unless you are planning on buying or selling securities for a good reason, there is really no need to constantly monitor your investment holdings. If you have a good financial and investment plan, dwelling on the constant up and down swings of the market is a good way to lose perspective of your long-term goals and make yourself crazy. “But shouldn’t I know what is going on in the markets?” asked a friend, who frequently became upset when she saw the wild swings in her account balance day to day over the last month. Of course you should, I said. It is important to follow economic news and to know what is happening in the world. However, if you are not planning on making changes, what purpose does it serve to let numbers on a page make you feel richer or poorer on an hour by hour basis?

Compulsively checking the fluctuations in the stock market is like weighing yourself multiple times a day when you’re on a diet. If you weigh yourself first thing in the morning, you’ll probably be at the lightest weight of the day. (That is why when I used to weigh myself, I did it then.) If you’ve just eaten lunch, however, the scale will probably register the turkey sandwich and bowl of soup. Does that mean that net-net you’ve really gained weight? What is your true weight? The early morning weight or the post-lunch weight? Have you gained or lost? You can make yourself insane guessing what these fluctuating numbers mean. It is the same with the stock market. How much are you worth? Unless you’re applying for a loan or tomorrow, these currently erratic numbers are only a temporary representation of the value of your holdings.

Weight Watchers recommends that dieters on their program weigh once a week. Like many financial advisors tell clients, they encourage dieters to slowly build toward a healthier future. What happens today does not determine the rest of your life. So look at your statements or the news sparingly, with an eye to the future. Be aware that like your weight, the balance of your investments will fluctuate even in a good market environment.

While TV news can be informative and instructive, the “crisis” tone of recent weeks may not be helpful or healthy for you to watch. The ups and downs may continue, but if your focus is long term, think long term and adopt a long term routine of monitoring performance. Turn the short-term thinking and surveillance off. You will feel better.

Suzanna de Baca is president of Private Capital Solutions Group. Securities offered through Broker Dealer Financial Services Corp. Member FINRA & SIPC. Investment Advisor Representative of Investment Advisors Corp., A Registered Investment Advisor. Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal or investment advice. Although the information has been gathered from sources believed reliable, please note that individual situations can vary, therefore the information should be relied upon when coordinated with individual professional advice.