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Too afraid to check your 401(k)? Too worried to take a look at your brokerage account? Here’s when to look — and when to go for a walk instead

To look or not to look.

That’s the question people ask when they consider checking their investment and retirement account balances.

Perhaps ignorance is bliss amid volatile stock market sell-offs.

The S&P 500 SPX,
+1.26%
entered a technical bear market on Monday. The 20% drop in price from an early January peak wiped out an estimated $9.3 trillion in market value among the companies that make up the benchmark. Numbers like that can be hard on the eyes, not to mention the stomach.

On Tuesday, the S&P 500 dipped deeper into bear territory and White House press secretary Karine Jean-Pierre acknowledged that Americans are unsettled by the volatile markets.

On Wednesday, the Federal Reserve will announce its policy decision on the benchmark interest rate and will release updated economic forecasts on Wednesday at 2:00 p.m. Eastern time, a decision that markets will be closely watching. Powell will host a press conference at the Fed’s Washington headquarters at 2:30 p.m

“When markets are volatile, investors often find it difficult to look the other way, but staying the course when you have a plan is usually a good decision.”


— Leanna Devinney, Vice President, Industry Director at Fidelity Investments

These are all good events to follow. After all, knowledge is power. But what about knowing how your portfolio is holding up?

In a pullback, there are bound to be investment bargains and portfolio rebalancing opportunities. These steps begin with a portfolio review to identify winners and losers.

As such, there are arguments to look for and Not to look at, investment professionals told MarketWatch.

Specifically, it depends on the type of person you are, the type of account you have and how long before you need the money, the advisors noted. Can you endure large fluctuations in the value of your portfolio? How close are you to retirement?

“When markets are volatile, it’s often difficult for investors to look away, but staying the course when you have a plan is usually a good decision,” said Leanna Devinney, vice president and industry director at Fidelity Investments.

“If you frequently review balance sheets, also consider what your long-term goals are and that trying to get in and out of the market can be costly,” she added.

“Human behavior is the most influential variable in money management and personal financial outcomes.”


— Eric Cooper, financial planner at the Commonwealth Financial Group

“It would be great if the answer was simple and universal. As with most things in life, the answer is a little more nuanced,” added Eric Cooper, financial planner at Commonwealth Financial Group. “Human behavior is the most influential variable in money management and personal financial outcomes.”

“If we understand this, the answer to this question is determined primarily by intent to mitigate the flaws of the misaligned (or myopic) human perspective and only secondarily by tactical strategy,” said the in Bedford, NH, resident consultants.

Simply put, if you’re the type to panic, don’t look.

To be clear, nobody advocates hourly balance checks. And no one calls for total disregard for long, undefined stretches. Some research suggests that people avoid looking at the negative information in the so-called “ostrich effect” when bad financial news hits an account.

There’s still a spectrum between the extremes when it comes to looking at investment performance. Here’s a guide to see where you fit:

when to look away

“If you are more than 10 years away from retirement, there is one no You need to check your 401(k) balance regularly,” said Danika Waddell, the founder and president of Xena Financial Planning, which only checks her retirement accounts once a quarter.

After all, most Americans have to be 59½ years old to be able to freely retire from their 401(k) plans and traditional IRAs without paying a hefty fine, so they have to climb the troughs and peaks and fight back against that money in a descent skimming market.

If a person has an account that they don’t need to tap into for at least seven years, it should be “monitored regularly, but not stared at regularly,” Cooper said. This means that a quarterly, semi-annual or annual review should suffice. It becomes a different calculation when the time horizon is shorter, Cooper acknowledged.

“I don’t want to weigh myself every day. Sure over time, but daily fluctuations are practically meaningless.’


— Danika Waddell, the founder and president of Xena Financial Planning

There’s also the emotional factor. “Psychologically, most people just don’t thrive when their noses dip into the rollercoaster of their account balances in a volatile market — regardless of their time horizon,” Cooper said.

Think about what will inspire more anxiety: checking more or checking less, Waddell said. If the review causes anxiety more than once a month, don’t do it. But if quarterly checks seem too far away, move on to monthly or weekly checks, which feel like a less stressful frequency.

But daily checks, which Waddell likened to daily trips to the scale, make no sense. “I don’t want to weigh myself every day. Sure over time, but the daily fluctuations are practically meaningless.”

when to watch

Time horizon and temperament are two things to keep in mind when considering the issue of persistent beeping.

So is the type of account — and if it’s a brokerage account, that’s a strong reason to check more often, according to Todd Minear, a managing director of Open Road Wealth Management in Liberty, Missouri. One reason is the laggards in a portfolio and throwing them away for tax purposes, he explained.

Selling assets such as stocks at a loss can leave owners with a loss of capital that they can claim against capital gains taxes. If the amount of losses exceeds profits, the Internal Revenue Service allows a taxpayer to deduct losses of up to $3,000 from their income.
Collecting losses and selling strategically is collecting tax losses, and it’s a strategy some investors should consider for their brokerage account, Minear said.

If you’re looking to switch from a traditional IRA to a Roth IRA, that’s reason to keep a closer eye on your account’s performance.

Rebalancing an IRA or 401(k) account by adding or omitting certain investments will not result in a tax event in the following tax season. But if you’re looking to switch from a traditional IRA to a Roth IRA in light of the market downturn, that’s another reason to keep a closer eye on your account’s performance, Minear said.

Contributions are not deductible in a Roth IRA, but distributions come out tax-free. If you expect to be in a higher tax bracket when collecting the money for distributions, it might be beneficial to get the tax liability out of the way sooner. Switching from a traditional IRA to a Roth IRA requires cash to pay the tax bill accompanying the switch.

An account with values ​​that are being knocked down by market forces will result in a lower tax bill for the conversion, Minear explained. Of course, before you can even think about moving, you need to check your bank balance first.

Which brings us back to the topic of retirement accounts and how closely people should watch for retirement dates to be approaching.

“Major swings today may or may not be fully recoverable by the time you expect the money to have some withdrawal requirements.”


— Eric Cooper, financial planner at the Commonwealth Financial Group

People who need to start using account money in the next three to six years, an interim period, may need to “pay a little more attention, as large swings today may be fully recoverable by the time you expect them to be.” or not money to make some withdrawal requests,” Cooper wrote. Think of quarterly or monthly reviews here.

For people who need account money in two years or less — maybe cash for a down payment on a house or payouts to retire — Cooper said you should “keep busy with the portfolio.”

Monthly or bi-weekly checks by the investor or his advisor are appropriate here, Cooper added.

Ultimately, it’s a balance of priorities, personality (yours), and the nature of your portfolio.

“What I hear from non-customers is, ‘Yeah, I just won’t open my statements.'” But he added, “A person who doesn’t know what’s going on can be very concerned.”

Still, there’s a limit to account insights, Minear added: “Don’t pull it into your app five times a day.”

Related:

The only question to ask yourself about your 401(k) when stock indexes are falling

How to manage your money – and your emotions – when it seems the world is about to collapse

Don’t panic about your 401(k)

https://www.marketwatch.com/story/too-scared-to-check-your-401-k-too-worried-to-peek-at-your-brokerage-account-heres-when-you-should-look-and-when-you-should-go-for-a-walk-instead-11655302283?rss=1&siteid=rss Too afraid to check your 401(k)? Too worried to take a look at your brokerage account? Here’s when to look — and when to go for a walk instead

Brian Lowry

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