Last week I was driving home from St. Louis one night and decided to stop off at Clementines while across the river to take some ice cream home to the family.

With a 30-minute drive ahead and the temperature outside still at 85 degrees, I knew getting the ice cream home without melting would be a challenge.

I thought blasting the air conditioning would help slow the decay. 10 minutes down the road I pulled the ice cream out of the bag to see how much it had melted so far, only slightly, thank goodness (also thank goodness I already devoured my cone in the car).

5 minutes later I checked again, it was melting a little bit faster now. I felt a sense of worry and began driving a little bit faster.

Another 5 minutes went by I decided to check again, I could see the bottom of the cup getting milky.

Then it occurred to me “why do I keep checking? What am I going to do about it? Nothing. Speeding won’t get me home THAT much faster. Either I get home and it’s fine or I have to put it in the freezer for a little while and then it will be fine”.

Checking on its status during my drive was silly and pointless.

This experience with the melting ice cream reminded me of a common habit many investors have: checking their portfolios too often.

Checking on Your Portfolio

It is a core belief of mine (due to a tremendous body of evidence on the subject) that short-term changes in portfolio values should not alter one’s approach to investing.

Just like I couldn’t stop the ice cream from melting by constantly checking on it, you can’t control market fluctuations by frequently checking your portfolio—especially when we know that all historical market declines have been temporary. Maybe your portfolio is invested recklessly by betting big on certain companies or sectors, then your declines may be permanent instead of temporary.

If you only want to be in the market for the upside and avoid the downside, you’ll undoubtedly fail.

Is it possible that checking your portfolio too often can have a detrimental effect? I can assure you my drive home that night would have been less stressful had I accepted the potential outcomes and lack of action I can take a bit sooner.

The Research

In their 1979 groundbreaking work on behavioral economics, Daniel Kahneman and Amos Tversky (authors of the best selling book, Thinking Fast and Slow) developed Prospect Theory, which reveals that investors are far more sensitive to losses than gains.

Shlomo Benartzi and Richard Thaler's 1995 study introduced the concept of 'myopic loss aversion,' demonstrating that frequent portfolio checks increase the likelihood of perceiving losses, which in turn makes investors more risk-averse, potentially leading to poorer investment decisions.

Why would someone checking their portfolio more often be more likely to see losses? Here’s why:

This beautiful illustration from www.ifa.com on the S&P 500 index shows the S&P 500 index declined 48.92% of all days from 01/01/1928 – 07/31/2024.

If you’re checking your portfolio every day, you may be sad about half the time.

Further if you look out to 1-year, only about 24.91% of 1-year periods have shown negative returns and only 0.71% of 15 year periods.

It appears Thaler and Benartzi were correct, investors who check their portfolios more often are more likely to see losses. Given Kahneman and Tversky’s Prospect Theory showing that we are more sensitive to losses than gains, we may be causing a lot of unnecessary harm to ourselves if checking our portfolios too often.

How Often Should You Check Your Portfolio?

Just like the goal was to get the ice cream to its destination intact, the goal with investing is to reach your financial objectives. Any bumps along the way can usually be smoothed out with time and patience.

Your financial planner should communicate with you in periodic meetings whether or not you are still on track for your financial goals, and if any tweaks are needed to the plan.

Checking your portfolio value everyday seems like overkill to me, but if it does not lead to psychological harm or action being taken then it is okay. Personally, I only check my portfolio value about once a month, which helps me stay focused on long-term goals rather than short-term fluctuations.

In investing, as in life, patience often leads to better outcomes. By resisting the urge to constantly check your portfolio, you can avoid unnecessary stress and stay on track to achieve your financial goals.