- 25th Jun 2015
Are you a set and forget investor?
We can all be guilty of it – constantly checking something we know we shouldn’t. A cake in the oven or the scales when you’re only a day into a diet. It’s one of those things; you know it’s not going to help or change anything, but sometimes you just can’t help yourself! But all too often, the cake isn’t ever done and you haven’t lost as much weight as you’d hoped.
When it comes to your investments, the same rules can be applied.
Finding a balance
Taking an interest in your finances and investments is very important and should most definitely be advocated. But it’s important to strike a good balance. Investing is a long term decision – and its long term because of the inherent risks associated with investing. Stock markets don’t always go up; there can often be periods of uncertainty or volatility.
Checking your portfolio every day can lead to some common outcomes; needless worrying and portfolio tampering, to name a couple.
Watching your portfolio fall one day, then rise the next, is enough to get your blood pressure rising. The stock market is unpredictable in its nature and that won’t change. Watching your investments go up and down can make you easily forget the goals and time horizons you put in place when you started. Short term results spring to the forefront of the mind, and a couple of trades later you’ve got a different portfolio than you ever intended.
Our own worst enemy
Our human nature can be our own worst enemy at times. At our core we’re impatient – we love to meddle and try to fix. With investing, this can end up being a costly trait. Immediately, if you do succumb, costs are incurred in terms of transactional fees for buying and selling. Not only this, but you’ll be out of the market for a short period too. That’s going to either work to your advantage or cost you money – you just don’t know – but it’s an additional risk incurred nonetheless.
Stock market swings can bring out strong emotional reactions too. Large drops in the market can often provoke an urge to sell. And, while this reaction might seem the safest thing to do at the time, history shows a trend of stock market recovery. While an emotional investor may end up locking in losses, a ‘set and forget’ investor rides out the negative weeks or months.
Boring isn’t bad
Something is not always better than nothing. Set and forget investing doesn’t mean you shouldn’t take an interest, it just means spending less time worrying and more time doing the things you enjoy.
Make sure your portfolio is set up properly to begin with and then leave the rest of the work to the stock market. It’s a much simpler, and effective, solution.
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Any news and/or views expressed within this article are intended as general information only and should not be viewed as a form of personal recommendation. This article is not directed to, or intended for distribution or use in, any jurisdiction where such distribution would be prohibited. To the extent permitted by law, Wealth Horizon accepts no duty of care or liability for loss occasioned to any person acting or refraining from acting as a result of any material contained within this article. Where past performance is shown, this should not be taken as a guide to future returns. Investment in the stock market is not a suitable place for short term money. The value of investments and associated income may go down as well as up and you may not get back the full amount invested.