Q: I'm new to investing and recently bought my first few stocks. How often should I check their prices?
About a year ago I told my father, who generally just buys mutual funds, that I thought Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B) looked attractive, so he bought some shares. The very next day, the stock fell by over 2%, which cost him (on paper) a few hundred dollars. He promptly called me to tell me I may have given him bad advice.
I told him he was missing the point. Trying to time the market is a losing battle, and it can actually be counterproductive to constantly monitor your stocks. Specifically, emotions can cause investors to make rash decisions that are the opposite of what they should do. When stocks fall quickly, emotional investors panic and sell. On the other hand, when stocks rise rapidly, investors see everyone else making money and buy.
It's common knowledge that the main point of investing is to buy low and sell high, but emotional investing makes people do the exact opposite. Studies have shown that the average investor significantly underperforms the market, and this is a big reason why.
I'm not saying that you should simply buy stocks and forget about them. It's important to check them every so often, and more importantly, you should keep yourself updated with the company's latest quarterly results and other news to make sure your reasons for buying in the first place still apply.
But you shouldn't necessarily check your stocks every day. I check mine roughly once a week, but never base a decision to sell solely on a price change.
As for my father? I convinced him to stop obsessing over Berkshire's stock price. His investment is now up 17%.
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