How often should you check investment returns?
By Tony Kaye, Senior Personal Finance Writer, Vanguard Australia
It’s natural to want to monitor your portfolio value, but how often is too often? Is there any real benefit in checking your investment returns daily, weekly, or even monthly?
Before you started reading this article, did you already do a check-up on your investment portfolio value?
If you did, and do so just about every day, you’re certainly not alone.
After all, it’s human nature to look regularly at what financial markets have been doing and how your specific investments have performed.
And that’s so easy to do these days through online financial platforms.
Vanguard Australia recently surveyed more than 1,000 Australian investors and found almost one-third (28 per cent) of respondents check their investment returns every day.
A similar percentage of investors check their returns weekly, and about 20 per cent check theirs monthly. Less than 10 per cent of investors look at their returns less frequently.
That’s almost 60 per cent of investors who look at their returns at least weekly, and another 20 per cent who check every few weeks.
But how often is too much? Is there any real benefit in checking your investment returns daily, weekly, or even monthly?
After all, a daily pulse check can only provide an extremely short-term snapshot based on the market rises and falls over the immediate trading period.
If you check your returns in the morning, they will invariably be different by the end of the day.
Checking weekly cancels out some of the day-to-day market volatility, but even a week is still very short term.
Over a month you’ll potentially get a slightly clearer picture but, again, a few weeks is not really going to be strongly indicative of broader market trends.
What’s your strategy?
Short-term market events can be unsettling, especially when your money is invested in highly volatile assets such as shares.
Take last year for example, when financial markets fell more than 30 per cent over just a couple of weeks as investor panic set in over the spread of Covid-19.
People who checked on their returns daily (even multiple times a day) or weekly at that time would have seen their returns fall very sharply.
Depending on when they started investing, many may have seen their profits totally wiped out and their investments showing large capital losses.
It was a disturbing short-term period, but within a month or so markets had already started to rebound.
Now, just over 12 months later, the Australian and other key share markets are trading near record highs.
The power of compounding returns
The key lesson here is that, irrespective of short-term events, it’s always important to stay focused on your long-term investment goals and your overarching strategy to achieve them.
Short-term market movements ultimately will have little impact on your longer-term returns.
While we’re still a little way off from being able to rule off the investment books to the end of this financial year, it’s evident that global financial markets have performed strongly over the last 12 months.
That being said, one year is still a relatively short period of time in the context of investing and being able to measure your returns on a meaningful level.
Which is why Vanguard produces a chart every year showing the returns from a range of different asset classes over a 30-year period.
Among other key events, the last 30 years includes both the 2007-08 Global Financial Crisis and the 2020 Covid-19 market crash.
The 2020 Vanguard Index Chart shows that a $10,000 investment made into Australian shares in 1990 would have achieved an 8.9 per cent total return per annum if all distributions had been reinvested and grown to $130,457 by 30 June 2020.
Over the same time frame, and using the same strategy, a $10,000 investment into the broad United States share market would have delivered a 10.3 per cent per annum return and grown to $186,799.
The 2021 Vanguard Index Chart covering the 30 years to the end of 30 June 2021 will be released in the next few months.
Even a low initial balance will grow substantially over time when combined with compounding investment returns.
There’s nothing inherently wrong with checking your investments daily, weekly or monthly.
However, the most important thing to do as an investor is to stay disciplined and remain focused on the longer term.
Successful investing revolves around having a well-planned and diversified strategy that’s aligned to your specific goals, and the resolve to stay on track even during volatile investment periods.
Investors who stay the course over time, riding through the regular ups and downs of the markets, have a much better chance of achieving investment success than those who take short-term positions and try to time when to buy and sell.