Did you check the stock market today? I bet you did.
But you probably didn't need to. Did you make an important change to your portfolio? I doubt it. Was there game-changing news in any of the companies you invest in? Unlikely. There rarely is. You just wanted to look at numbers going up and down.
It's well known that this behavior can cause bad investment results. As Buffett says, "Until you can manage your emotions, don't expect to manage money."
But it can also do a number on your health. In a new paper, Joseph Engelberg and Christopher Parsons of the University of California show "a strong inverse link between daily stock returns and hospital admissions, particularly for psychological conditions such as anxiety, panic disorder, or major depression."
Digging through California hospital admission records and stock market returns from 1983 to 2011, the two found that a 1.5% stock market decline increased hospital admissions by 0.26% over the following two days. Narrowing it down to psychological complaints like panic attacks and stress, the effect was twice as high. Literally, a declining stock market makes people sick.
It's no secret that the economy impacts people's physical health. Til von Wachter of Columbia has shown that losing a job during the worst economic downturns can reduce life expectancy by 1.5 years. Policymakers have even been know to shelter the truth lest it sets off panic and makes a situation worse. At a conference last year, former Treasury secretary Larry Summer said, "Transparency is a good strategy when things are better than expected." Jeroen Dijsselbloem, the Dutch finance minister, put it more bluntly: "When the going gets tough, you have to lie."
But losing a job or experiencing a bank run is largely outside of your control. Checking the stock market is voluntary. Even if you check the market, how you interpret a decline is up to you. Some see a big market decline as a stressful slash to their net worth. Others view it as an inevitable, unavoidable, temporary feature of markets, or even an opportunity to buy more. The same event can mean very different things to different people, and which side you fall on is entirely up to you.
Engelberg and Parsons write: "It is natural to think about the welfare implications associated with the widespread dissemination of financial information, on an almost minute-to-minute basis." This is a fair point until you realize their study uses data from all the way back to 1983, long before individual investors had up-to-the-minute market information, to say nothing of blogs and Twitter. What seems more likely is that investors seek out information that is harmful not only to their investment health, but their physical health, regardless of how easy it is to obtain. Being bombarded with market news all day may be bad, but checking the market's performance in the evening newspaper appears just as bad. What matters is that you see red. You see your money disappear. And that makes you sick.
If you check market news on a daily basis for anything other than entertainment or to seek out new opportunities, stop hurting yourself. Try to limit yourself to a once-a-week update. Once a month will likely suffice. If you're an index investor with a long-term horizon, there should be no harm in checking in even less frequently. "Mr. Market is there to serve you, not to guide you," Ben Graham, Warren Buffett's early mentor, used to say.
Turn off the TV. Put the paper down. Go for a walk. Your stocks will be just fine.
