Don’t Be a Helicopter Investor

Don't do it. Don't pay too much attention to short term market movements. Don't check your accounts daily, or even weekly. Don't be a helicopter investor.I couldn’t believe what I had done.

I had checked on how the markets had closed every day for an entire week. In addition, I had logged in to my investment accounts each day, pondering how I could “tweak” my portfolio to eke an ever so slightly higher rate of return.

I had become one of THOSE investors.

I had become… a helicopter investor.

 

What’s a Helicopter Investor?

Much like its parental counterpart, I envision a helicopter investor as someone who hovers over their investments. They are overly focused on their portfolio, the financial news, and the day-to-day fluctuations of the stock market. A helicopter investor might log into their accounts daily, or weekly for that matter. They might pull up market news on their smartphone multiple times throughout the day. Or they might make several “strategic” changes to their portfolio in order to “maximize” its performance.

 

Potential Problems with Being a Helicopter Investor

It is a good idea to monitor your investments regularly. After all, it’s important to rebalance your portfolio in order to maintain your target asset allocation. Problems tend to come up, however, once you start checking on things too frequently.

 

You could end up making decisions based on the short-term

Investing should be a long-term endeavor, something that you do over the course of several years. Paying too much attention to your investments or financial news, however, could lead you to make decisions based on the short-term volatility of the market. Instead of keeping an eye on the big picture, you end up focusing on what’s happening right now.

 

I will catch you, investment returns!
You may end up chasing returns

It’s easy to get caught up in the recent performance of a hot stock or market sector. As an example, international stocks have been on a tear throughout the entire year. The Vanguard Total International Stock Index, for instance, has seen a year-to-date return of 21.56%. I’m sure there are investors out there that have made changes to their portfolio based on these returns, even if it goes contrary to their original investment strategy and asset allocation. Those same investors may then turn around and sell if the future performance doesn’t correlate with the present. They have, in essence, bought high and sold low.

 

You might make “emotional” decisions

It’s tough watching your hard-earned money go down in value during a correction or bear market. While some would see this as a buying opportunity, others can’t stomach seeing their savings drop by ten, twenty, or thirty percent. Checking their investments frequently during these downturns would only serve to magnify their feelings of anxiety. And rather than remaining focused on the long-term and staying the course, they instead could make an emotional decision to sell, cut their losses, and get out of the market entirely.

 

 

What to Do if You’re Exhibiting Helicopter Tendencies

Come on. Log out of Personal Capital* and enjoy the nice day!
Unplug yourself

Nowadays, access to information is easy and convenient. Almost everyone has a smartphone, and there’s an app for pretty much everything. But if you’re tempted to check on your account balances or market news way too much because of this ease of access, then maybe you should just delete those apps entirely. If that’s too drastic, you could arrange your applications so that the financial ones aren’t on your home screen.

 

Create an investment policy statement

An investment policy statement (IPS)ย is a statement or document that outlines your general investment goals and objectives. It also establishes your specific investing strategy, risk tolerance, asset allocation, and investment philosophy. You can also include a section on how often you want to monitor your portfolio and when to rebalance. Write your IPS down. Keep it handy so you can refer to it when needed.

 

Stick with YOUR plan

Personal finance is personal, and everyone will have different goals and investment plans. The key, however, is to stick with yours. If that calls for making regular investments, then do that. Don’t worry about what the market does on a day-to-day basis. If your asset allocation dictates 30% international stocks, stick with it. Don’t be tempted to add more because of recent performance.

 

In Conclusion

Yes, I once was a helicopter investor. But I have since changed my ways. I check on my accounts quarterly, rebalance only when needed, and have an investment plan that I know I can stick with for the long haul. I don’t have any stock market apps on my phone, nor do I pay much attention to all of the “financial noise” that’s out there.

When it comes to investing, I think the less you check on your investments the better. Don’t get me wrong, it is important to perform regular portfolio check-ups. I just don’t think it’s wise to obsess about things on a day-to-day, week-to-week, or even month-to-month basis.

So do yourself, and your investments, a favor. Stop babying them. Give them some space and room to grow. In the end, you’ll be thankful that you did.

 

Readers, what do you think? Can you monitor your investments too much? Do you (or did you) have helicopter investor tendencies? Let me know in the comments below!

 

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* I have no financial relationship with Personal Capital. I just use their service to monitor my investments. Occasionally, of course.

24 thoughts on “Don’t Be a Helicopter Investor

  • October 11, 2017 at 7:48 am
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    Sooo true. I heard somewhere that this mentality is also the difference between an “investor” and a “trader.” Investors are interested in long-term gains, not adjusting their portfolio every day.

    • October 11, 2017 at 3:24 pm
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      Yes it definitely is a different mentality. In A Random Walk Down Wall Street, Burton Malkiel likens short-term investors to speculators. Another interesting take.

  • October 11, 2017 at 8:47 am
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    I’m very guilty of helicopter investing. I can’t help it, but I link all my accounts to Mint and Personal Capital, and I open it up every morning. Obviously, I get happy right now because things keep going up, but I just know I might have to delete them off Mint if things go south and I get too scared.

    • October 11, 2017 at 3:27 pm
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      Thanks for stopping by, FP. I hear you, it can be quite the feeling watching your investments grow in good times. In bad times it can be disheartening, and I think checking on your investments during these times could lead some investors to make short-term decisions that have long-term impacts.

  • October 11, 2017 at 8:49 am
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    Good post

    • October 11, 2017 at 3:28 pm
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      Thanks for stopping by, Hatton1! Glad you enjoyed the post.

  • October 11, 2017 at 9:18 am
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    We are “free range” investors lol. We only check once or twice a year.

    But once we pay off our mortgage, we will have plenty of extra money to invest and will follow your suggestion of checking every quarter.

    • October 11, 2017 at 3:31 pm
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      I like that term, Ms99to1percent. Quarterly check-ups are what works for me at the moment, but I have toyed with the idea of doing them twice a year instead. We’ll see. I think whatever works with your personality and investment philosophy. Thanks for stopping by!

  • October 11, 2017 at 11:51 am
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    It is totally possible to check your net worth daily and not to even think about making any changes based on what you see. I know because that’s what I do. I never altered a single position in 2000 or 2008 in my portfolios which were 100% in stock. Yeah I lost hundreds of thousands of dollars on paper but, hey, so what? If you don’t believe the market is going to go up in the long term then why would you have bought into it to begin with? It isn’t a problem for me but I realize it can be for others so I don’t argue with your advice at all.

    • October 11, 2017 at 3:35 pm
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      Thanks for sharing! That’s great you were able to stay the course during those times. If it were me, I know I probably would have felt some angst and anxiety. I guess I’m more of an “out of sight, out of mind” kind of guy. But everyone has their own investment style and philosophy. I would just hate for someone to bail in a down market because they followed their investments too closely.

  • October 11, 2017 at 4:04 pm
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    I definitely agree. Especially in a down market all frequent checks will do is either cause you anxiety or make you wrongly act.. actions should be no more then quarterly in my honest opinion. Even that may be aggressive

    • October 11, 2017 at 9:35 pm
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      Thanks for stopping by, FTF! I’ve settled in on quarterly checks of my investments. But that mainly entails updating my spreadsheets and making sure my allocations are within range. A part of me wants to spread out these check-ups even further, but I’m going with every three months for now.

  • October 14, 2017 at 3:39 pm
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    We are similar to Financial Panther, in that all of our accounts (brokerage, checking, savings, retirement, credit cards) are on Mint. So we end up seeing how our investments are doing on, at least, a weekly basis. That said, we stick with our plan, which is essentially the Investment Policy Statement that you mention in the post. We’ve been investing for long enough now, so we know how to handle bear markets.

    • October 14, 2017 at 9:10 pm
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      Thanks for stopping by, Mr. N2S! Sounds like you’ve had enough experience to know how you’d react in a down market. Like you alluded to, as long as you have a plan that you can stick with for the long haul, it’s all good!

  • October 26, 2017 at 4:41 am
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    Checking my portfolio gives me satisfaction in an otherwise stressful life. I check my portfolio(Basically 1 fund) every day to get confidence that I can quit and not worry about pay check for some years.

    • October 27, 2017 at 10:27 pm
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      Thanks for visiting, S! That’s great that watching your portfolio gives you satisfaction and helps with life’s stresses. The only potential problem is if your investments and/or the market start declining and you see your portfolio get smaller and smaller. I think that’s when over-checking your investments can lead to trouble.

  • October 26, 2017 at 6:09 am
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    One of my friends was very excited to tell me about a service called Blooom that constantly moves your money around to better performing investments in an effort to maximize returns. I would liken that to a helicopter investment strategy. It’s much better to stick with something, I’ve believed that since I started reading John Bogle. I think investing is one of those things where people want a magic answer. The best advice is usually much less magical and more practical.

    • October 27, 2017 at 10:29 pm
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      Thanks for stopping by, Elise! That Blooom service seems a little too complicated for my taste, and sounds a bit like chasing returns. I’m of the same mindset when it comes to investing… sticking with your strategy for the long term. And if it’s for the long term, then there’s no need to check frequently. Just my opinion. Thanks for the comment!

  • October 26, 2017 at 1:34 pm
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    Guilty as charged, SRGO. But in my defense, I only check my portfolio daily because of my lithium stock. I bought it in 2013 at $0.17 per share. It started 2017 at $0.59 per share. It’s now up to $1.63 per share. My paper profit is over $100K, so it’s been fun to watch. But other than looking, I haven’t really done anything with my portfolio. Just a couple of trades to maintain my desired allocation. That’s it. Is it okay to be a helicopter investor if all you do is rebalance once or twice a year? Or am I playing with fire? Great post, SRGO. Very sage advice.

    • October 27, 2017 at 10:20 pm
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      Thanks for stopping by, Mr. Groovy. My hesitation with watching your investments too closely don’t really pop up during good times. It’s during market downturns where I think people can make decisions based on emotion rather than their investment plan. But everyone’s different. I’ve never experienced a bear market as an investor since I was in medical school during the 2008-2009 financial crisis and wasn’t investing during the dot-com bust. I’d like to think that I would stay the course, but haven’t been through a bear so I don’t know for sure.

      I think if you’ve been through recessions without making emotional decisions and selling, then I don’t think you’re necessarily playing with fire. But if you’re mainly rebalancing your portfolio once or twice a year, then all that checking doesn’t seem to serve much purpose. Just my opinion as a random guy online. ๐Ÿ™‚

      • October 28, 2017 at 5:26 am
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        Nice comeback, my friend. Cannot argue with your impeccable logic. Consider me humbled.

  • October 27, 2017 at 6:26 am
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    I like the analogy to helicopter parenting. If you have your asset allocation correct, you should be more than comfortable letting it ride.

    Way to go on the Rockstat feature too. That should help the page views ๐Ÿ˜Š

    • October 27, 2017 at 10:24 pm
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      Thanks for visiting, John. Yeah, I the idea came to me when I was thinking to myself that I hope I don’t turn into a helicopter parent. Then I remembered how closely I watched my portfolio when I first started investing and how stressful it was, and all of that stress was self-imposed for no reason.

      Yes, the Rockstar feature was a pleasant surprise!

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