Much like checking your social media sites, looking up your stocks, if you are a serious investor in the share market today, may become an addiction that does not bode well for you. Like you keep viewing your social media portals, and these days, they may amount to at least three per person, checking on stocks may not be a good habit. Monitoring daily movements, if any, is not healthy.
Research shows that nearly half of all investors, on average, check their stock performance at least once in a day. The number may be higher with some investors. It's simple to fall prey to the excitement that the stock market provides today. However, if you get too involved and obsessed with it, it may easily have a negative effect. How? For starters, your performance in the stock market can deteriorate. Too much of something is not good, and “too much monitoring and tracking” can make you feel that your shares are performing worse than they actually are.
Scrutinising your shares daily tends to make your perception of them myopic. When you watch over the stock market today, you may feel that shares are performing badly and impulsively decide to pull out. This may be the wrong time to do so as you have taken your decision based on sheer feelings. It is important to note that investment in the share market, if you are a serious investor, is for the long term. Monitoring returns that you get in the short-term may lead you to sell your stocks for quick profit. However, you may discover, in the long run, the same stock could have had exponential returns for you. When you open a Demat account and purchase stocks, they should be held there for the long run. Therefore, if you really want to witness substantial returns, you should buy stocks and forget about them (at least for a while).
Human behaviour works strangely, and this applies to investors in the stock market too. Linked with too much and continuous checking of your stocks, is the feeling that stocks are prone to more risks. Plainly put, “myopic loss aversion” is translated as an investor becoming more sensitive to any losses than to the profits. Constant checking up on your shares makes you focus on what you have lost. If you avoid these daily checks, you will be more likely to accept the stock market for what it is - a risky place. The more losses you focus on, the more incorrect action you take by changing your allocation of wealth too soon. As everything is done online these days, including online trading and investing, apps have made it easier for investors to check their portfolios from hour to hour.
For many traders and investors in the markets today, constantly looking at portfolios may encourage more trading. For instance, some studies have found that people are prone to trade in the stocks that have done well in their portfolios. In the same way, they tend to do this for stocks that perform negatively too. This is not a strategy based on anything concrete, but the sole indicator of performance. By trading which is based on a whim, you hold potentially good stocks for a shorter time than you should. You also increase your tax burden as you may be struck by capital gains tax if you hold stocks for a short period. The whole point of strategic investing in the share market today is to go through all the dips and climbs of your stock over a long time. This is the only way you will reap rich returns with good stocks in the future.
Losses may be hard to bear, but history states that holding on makes you gain more. In contrast, if you keep seeing rising prices in the short run, it may prompt you to invest more and have you go astray, causing more risky behaviour should the markets take a turn.
The misconception that checking your stocks everyday keeps you on track of your investments can do you more harm than good. If you really want to keep your investments on a good course, you should have a written plan and work towards achieving that. Investing in the stock market today is just one part of this. Checking your stock value incessantly can lead to a habit that draws you away from more constructive use of your time. As you know, true investment means that you should ideally have a diversified portfolio, and not just one with a bulk of stocks.
With improvements in technology, even if you have the spare time available to check stocks, you should use it in other ways to grow your wealth. Besides, plugging in to the stock market at all hours of the day, leads you to have too much exposure to information you don’t need. Random news is unwelcome and this may divert your attention from more lucrative investment opportunities.
Investment gurus give two pieces of valuable advice to investors - 1) stick to the plan, and 2) don’t check a portfolio everyday. Sticking to financial plans should be easy once they are customised for different investors. However, resisting the need to keep a watchful eye over investments may be a challenge.
Nonetheless, if you are an investor who sees this likeness in your own behaviour, you should stop where you stand. It may be reassuring to keep seeing that your stocks are not sinking, but this compels you to take action that could be detrimental. When you open a Demat account with an expert in the field of investment, Motilal Oswal, you needn’t keep your eye on your portfolio much. With the initial investments you make from reliable tips, you get from Motilal Oswal, you can be rest assured of good returns without having to bat an eyelid.
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