If you’ve been struggling to pull yourself away from the stock market prices, you’ve probably realised that it’s not helping your results and would like to learn how to stop checking stocks.
Investors and traders who are checking stocks more than once a day have a higher risk of interfering with their trades. As a result, they get in their own way of success and make impulsive decisions they later come to regret. This is because these decisions are made out of emotion and not logic.
Having now coached over 2500 traders and investors, I like to use a Star Trek analogy. The emotive investor plays the role of Doctor McCoy. The panicky fearful worrier of the group who’s often found screaming, “we’re all gonna dieeeee!”. In my experience, most investors adopt the role of McCoy when prices fall. They panic and begin to invent scenarios of doom and failure in their heads. They model their success on the live price, and if the price is down, they cannot take it. Stock Market Anxiety Disorder (SMAD) is a real thing. It’s primarily caused by three reasons.
- You don’t want to lose your money, and the less you have, the greater the anxiety
- You don’t want others to think you’ve failed
- You don’t like not having any control over it
McCoy investors will often meddle with their portfolio. Selling at the first sign of trouble for fear of it getting worse. But this is often the worst thing they could do.
When I began trading and investing for the first time, I found myself glued to my screen. I checked my prices numerous times a day and would even keep the live charts up on my screen. The entire process was a constant waste of time. It created a rollercoaster ride of emotions that affected many parts of my everyday life. If the prices had fallen that day and I’d given some profits back, I would find myself snapping at my children.
The next day if prices bounced back up, I would be on cloud nine. I’d be dancing a jig and thinking I was invincible. This yo-yo of emotions played out for a long time until I eventually cottoned onto the fact it was all entirely pointless. I was making the process harder for myself. Investing became stressful, no longer fun. I didn’t want that, and at times it became too much for me. I longed for a way to make it fun again.
Eventually, I realised it didn’t need to be this way. Constantly checking my prices was damaging any chance I had to attain great returns.
You see, the successful investors out there are Mr Spocks. They are logical, and they see opportunity when prices fall, and they know when prices rise that it’s just noise. They also understand the bigger picture of how to grow wealth in the markets. These investors are few and far between, but that doesn’t mean investors can’t be trained to think this way.
Ways to Stop Checking Your Stocks
Part of my role in leading my private investment club is to help our members to change their mindset and approach to investing. I want them to become more Spock-like in their thinking regarding their portfolios.
Most of the members of our group are long term investors. Typically buying more stocks every month to help aid the growth of their portfolio. They have a ten-year plan to hold the majority of these stocks at a minimum. Yet despite this, many of them will admit they still need help in learning how to stop checking stocks.
One member of my group, Imran, recently commented in our member’s Discord channel, “I feel more excited when stocks are down….hopefully, the market continues to be depressed until I have funds this month to invest”.
This is an example of the right mindset.
And he can apply this kind of mindset to his investing due to five main reasons:-
- He knows the businesses he’s investing in.
When you study and analyse the companies you choose to invest in, you’ll know why you’re investing in them. You’ll learn how profitable they are. How profitable they’ll be over the next ten years. You’ll know their strategy for growth and whether it makes sense to you or not. You’ll know what edge they have over the rest of the sector they operate in. You’ll also know what it would take to knock them off their perch or prevent their growth. When you know all this, it becomes easier to accept the everyday ebbs and flows of the market as you have strong confidence in the fact that the share price will rise well over the next ten years because they are doing everything right.
- He understands the difference between short term and long term outlooks.
When you’re a daytrader, you need to keep your eye on the price constantly. When you’re a swing trader, you need to check the markets every hour or so to watch for your exit signal. But for a long term investor, you rarely need to check at all. Why? Because the only thing that matters is the price at the time you want to sell up. For a long term investor, that may be 10-20 years down the line.
Dave Pierce, another member of my investment club, puts it wonderfully when he says, “I like to think of shares as being similar to rental properties. You own the shares through thick and thin in order to hopefully sell at a higher value in the Long term. Would you sell a rental property a week after buying it?”. Just because the rental property fell in value tomorrow from £325k to £320k doesn’t mean you’d sell it.
Remember, if you buy a stock with a ten-year outlook, the only thing that matters is what the stock will be worth in 10 years. Who cares what price it is next week or even next month? You never intended to sell them a month after buying, so why suddenly do so now they’re cheaper to buy? If anything, buy more!
- He buys every month.
I always encourage members to adopt a monthly buying practice. We each take a % of our income each month to pump into our respective portfolios. This dramatically encourages growth, but it also allows us to grow our holdings over different phases of the markets. This worked wonders over 2020-21, when prices took a tumble during the global pandemic. Those of us buying more each month were suddenly able to add to our holdings at incredibly cheap prices, whilst the McCoy’s of the world were panicking and telling the world, “this time it’s different, the markets will never recover”. Well, they did, and it took just months to do so this time. But when you are regularly adding, it makes the daily ebb and flow of the markets easier to stomach. The whole account is slowly rising in value anyway by the capital you’re introducing every month.
- He keeps his friends and family out of it.
When your friends and family are involved in your investments, it tends to raise one’s anxiety levels. My partner would panic if she discovered that yesterday our portfolio lost £400 in value. She’d also probably go on a shopping spree if she heard it rose £200 today. She’s not an investor, nor has she had the opportunity or experience to develop the right mindset.
Equally, I’ve had friends who have jumped on the text to inform me that one of my stocks plummeted in value that day. The fear and worry in their message plain to see. However well-intentioned, it doesn’t help. Today, I prefer to keep my portfolio activity within the circle of my investment group. Like-minded people think in the right way and help encourage each other to develop the correct mindset. When we see someone worrying about a 3% drop in value, the group swoops in to lift them and remind them that all that matters is what the price is when it’s time to sell up.
- He understands the value of price crashes.
My portfolio fell to -16% in value in March 2020 as the pandemic hit. I lost all the gains I’d made in the previous years. I witnessed investors quit right then and there. Investors in Facebook groups selling up for a considerable loss and giving up. It was the worst thing they could do. If we take the time to study the price crashes of the past 30 years (2001, 2008 and 2020), we see that generally, it only takes a year or two for the markets to recover fully. In the case of 2020, it was a matter of a few months before prices reached and surpassed their pre-crash levels. This means that all those investors had to do was wait and hold for the markets to recover.
Selling at a 50% discount was the only way they could have lost money. The least they should have done was sit on what they had and been patient. I’m sure most of those investors who sold at 50% off had previously not planned to sell in 2020. But fear overtook logic. The Spock’s of this world would have taken it one step further. They would have used their monthly capital investment and got buying up as much of their favourite shares as they could. Therefore not only waiting for the markets to recover but instead riding that recovery wave and making significant profits in the process. This is precisely what we did in our investment club in 2020, and by the end of 2020, I had personally made a +12.7% gain in value. A significant change from the -16% I was sitting on in March.
The bottom line here is, the worst that you expect is not the worst at all. Beginner investors fear crashes. They fear falling prices. However, our members are learning to love falling prices and become ecstatic about crashes. They are an excellent opportunity to grow significant amounts of wealth. And as long as you don’t go mental and sell your assets at the lowest price, a bit of patience will reward you handsomely.
So How Often Should we Check Stock Prices?
Warren Buffet once famously said, “just because you can get a quote on your holdings every minute of the day doesn’t mean you should”. Again, if you were to buy a house for £325k, most people wouldn’t have the value re-checked each day to see if it went up and down. They have no intention to sell the house yet, so the value is irrelevant. The same should be applied to your stock investments. Until you reach your planned moment of sale, all the interim price moves are just noise and are utterly irrelevant to you.
However, I check prices once a day.
What? After all this, you are still saying you check daily, Chris?
Yes. I do. But not for the reasons you may think. You see, I want to keep my ear to the ground for a deal. My investment club has a watchlist of 50 or so stocks we are constantly watching. Companies we have analysed and want to buy. However, we’re not just going to buy these companies at whatever price. We’re only willing to pay a fair price for them. If the shares are massively overpriced, then it doesn’t matter how great the underlying business is. I won’t pay over the odds for an investment as it runs the risk of seriously diminishing my returns.
So we watch. We watch those 50 odd stocks, and we identify precisely what price we would be happy to get in at.
When I check each day, that’s what I’m checking for. Have any of these outstanding growth stocks dropped in share price today, and has it fallen low enough for me to be interested?
That’s the right mindset that you as an investor need to develop. As you can imagine, when a crash happens, you’ll want as much cash available as possible as you’ll be spoilt for choice.
So it’s not so much about restricting yourself from looking at prices. Once a day is healthy enough (I tend to wait until the evening after markets have closed to check mine). You don’t need to stop checking stocks entirely. Instead, the issue is more about why you’re looking at them. This change will make all the difference and once you adopt this mindset, investing suddenly becomes fun and exciting again.
Finally, you could take this to another level if you wanted. Investment Club member John suggested in our private Discord channel recently, “if you’re not in the market to buy at the moment, don’t bother checking stocks, what’s the point?. I don’t need to know. I don’t care. I will need to know in 2 weeks”.
An excellent point.