2014 / Behavior

Why Looking At Your iPhone Can Cost You Thousands

For better or for worse, smartphones are here to stay. They provide convenience and ease that was unthinkable 20 years ago. Not only are we able to call or send a text message to anyone in the country with the touch of a few buttons, the explosion of mobile internet has put the world wide web in our very hands. This sounds like a good thing, but can be potentially disastrous to your investments.

If you find yourself standing in line at the local Starbucks, you will invariably see people whipping out their iPhones to pass the time. We don’t want to miss the latest email or Facebook post. We also want to casually check our bank accounts and investments. You know, just because. But this could be the most dangerous thing you can do to your finances.

That’s because iPhones come preloaded with a “stocks” app that gives you up to the second numbers on the major indices and any individual stocks you choose. The problem is that humans are emotional beings, and seeing that line go lower than it was earlier in the day can produce feelings of panic. Enough to even derail our meticulously planned retirement portfolio we crafted with our advisor. We invest in the market for retirement and other far off events, so daily fluctuations in the market shouldn’t faze us in the least bit. Stocks appreciate an average of 8% per year, but if you focus on daily fluctuations and react to news of the latest downturn, you will miss those great returns.

We should certainly be checking up on our investments from time to time, but definitely not on a daily basis. That’s because daily fluctuations tell you next to nothing, and are only giving you one piece of a thousand piece puzzle. Figuring out where all these pieces of the puzzle go and formulating your long term investment plan is something you and your advisor need to do together. You can also re-visit your investment mix and performance at certain intervals, such as every 6 months or once a year. This will give you a more complete look at your investments without being subject to the whim of daily market changes.

The other important thing to remember is that the markets will go up and they will go down. Any mutual funds and stock you choose will follow this pattern as well, so downturns themselves should NOT surprise you. In fact, in some cases they may be a good thing in the long term because if you are contributing consistently to your investments regardless of the state of the market (also known as dollar cost averaging), you will be buying investments on the cheap during a downturn. Re-investing any dividends received from your stocks or mutual funds will also keep your losses manageable, as well as put you in a better position when the market makes its eventual rebound.

While having all the information the markets have to offer available at your fingertips seems like a technological breakthrough, just looking at it for the sake of consuming information can be very detrimental to your returns. You and your advisor will go through a lot of information and have many conversations to find your appropriate investment mix. Don’t let yourself peek at some numbers on your phone and cause you to make a hasty decision that could cost you. Instead, pay attention to long term returns, kick back and enjoy that latte.

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