If You’re Doing This in Your Brokerage Account, You’re Setting Yourself Up to Fail

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It’s a practice you may want to rethink. 

If you have money you don’t need to put into your savings account for emergencies or near-term goals, then it pays to put it to work by investing it. And once you open your brokerage account, you may be inclined to check up on your portfolio often to see how it’s doing.

Checking your portfolio balance too frequently isn’t advisable. That’s because the stock market can fluctuate from day to day, which means your brokerage account balance could tumble one day and recover the next. And so it’s not worth putting yourself through the disappointment of seeing those dips when often, they’re only temporary.

But as much as it’s not a great idea to check up on your brokerage account daily, it’s definitely not a good idea to trade on a daily basis. Doing so could cause you to lose money in the stock market rather than grow wealth.

The problem with daily trading

To succeed as an investor, patience is key. And that’s why you’ll often hear that a good investing strategy is one that focuses on accumulating quality assets, diversifying your holdings, and then holding your stocks for many years. But if you trade daily in your brokerage account, you might thwart your efforts without even realizing it.

As just mentioned, the stock market can be quite fickle. It can rise and fall on a whim, sometimes without a discernible reason. And if you react to every single stock market swing, you could easily set yourself up to lose money — or lose out on making money.

Let’s say you make a point to trade in your brokerage account daily, and you notice that the value of a given stock you own has dropped quite a bit overnight. You may be inclined to sell it to cut your losses. But doing so means guaranteeing yourself a loss. Holding onto that stock could mean seeing its value not only recover, but rise.

Along these lines, let’s say a stock of yours sees its share price rise sharply overnight. You may be inclined to jump on the opportunity to sell it at a profit. But doing so could mean limiting your total profit, because it may be the case that in a few years from now, that stock is worth way more than what you’re selling it for now.

That’s why trading in your brokerage account daily just isn’t a great approach. You might choose to make trades some days, and that’s fine. But in general, your investing strategy should involve holding your stocks for years, if not decades. And that means riding out those days when your portfolio value declines, and resisting the urge to cash out your gains when it does well.

Set limits for yourself

If you’re the type who can’t seem to stop peeking into your brokerage account, set some ground rules. Tell yourself you can check on your investments once a week, but not more. And then, try to push that out to once every two weeks or once a month.

If there are stocks you know you want to buy consistently — say, scoop up shares every four weeks — then chances are, your brokerage account will allow you to set that up to happen automatically. And that way, you won’t be tempted to have a look when you’re not supposed to — and make rash decisions that hurt you financially.

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