Why checking your investments too often can make retirement harder, not safer.
Retirement portfolios need regular professional monitoring and rebalancing as investments, income needs and personal circumstances change – not a constant checking for reassurance during market fluctuations
There was a time when investors received a statement in the post every three months. They opened it, checked the value, filed it away and got on with life.
Today you can check your retirement portfolio before getting out of bed. By breakfast you can look at the rand. At lunchtime you can see what Europe is doing. At night you can watch America. WhatsApp groups, investment apps and social-media feeds can fill every gap in between.
We have never had more investment information. I am not convinced it has made us better investors.
A 30-year plan judged by what happened on Tuesday
Think about the mismatch. A 65-year-old retiree may need a portfolio capable of financing life until 90 or 95. That is a 25- or 30-year challenge.
Yet it is possible to judge whether the strategy is ‘working’ every day, sometimes every hour.
Imagine judging a 30-year marriage according to whether Tuesday went well. It makes no sense. Yet we do something remarkably similar with retirement portfolios.
Looking is not the problem. What happens next can be
Your portfolio does not know you opened the app. Looking at it cannot hurt it. The danger starts with what the information does to you.
You see the portfolio is down, so you search for an explanation. The internet gives you ten. You click on the most frightening one. The algorithm notices.
Soon your feed is filled with people explaining why markets, currencies, property, government finances or the entire financial system are about to collapse.
You check the portfolio again. Now you feel worse. Eventually an innocent habit becomes an investment question: ‘Shouldn’t I do something?’
Volatility changes what we focus on
Morningstar’s behavioural research found that during market volatility, advisors reported clients wanting to discuss the causes of market movements in 47% of cases and their own investment performance in 31%. Long-term goals were raised in only 3%.
That tells us something important. When markets become noisy, we watch the scoreboard and forget why we are playing the game.
For a retiree, the more useful questions are whether the portfolio can still provide the required income, whether the drawdown remains appropriate, whether there is enough liquidity, whether the portfolio is properly diversified and whether the long-term retirement projection still works.
Those questions matter far more than what Wall Street did last night.
Monitoring and obsessing are not the same thing
Retirement investments absolutely need monitoring. Asset allocations drift. Fund managers change. Income needs change. Portfolios need rebalancing. Financial circumstances change.
That is professional monitoring.
Emotional monitoring is different. It is checking the portfolio because you are looking for reassurance. Unfortunately, markets are very bad at providing reassurance on demand.
Give yourself permission to retire
One of the sadder outcomes is someone who works for 40 years to achieve financial independence and then spends retirement worrying about the money every day.
A well-designed retirement strategy should create freedom, not another full-time job. Agree with your financial planner what will be monitored, how often the plan will be formally reviewed and what events should trigger an additional review.
Then go and enjoy your retirement.
Your grandchildren are unlikely to remember what the rand-dollar exchange rate was when they were seven. They may remember whether you were there.
Successful retirement investing is not about watching your money every day. It is about building a plan that means you do not have to.
Article by Wouter Fourie – Ascor Independent Wealth Managers