Investing Strategy: Set it and Forget It (Except Once Annually for Rebalancing)
It’s very tempting to quickly peek at your investments to see if they’ve gone up or down in the past twenty-four hours. The same technology that makes our lives so much easier, computer software, can drive us insane. It takes almost no effort to log into my company’s 401(k) website. When I’m at home, Quicken is only one Quick Launch icon away. At any given time, morning or night, it can take me less than 30 seconds to determine whether my tune for the day is The Gold Diggers’ Song (We’re In the Money) or Stormy Weather.
This is not necessarily a good thing. While I can usually control myself, I’ve occasionally pulled the trigger and rebalanced my 401(k) asset allocation when I shouldn’t have. These days I pay less attention to detail but I haven’t solidified my asset allocation strategy.
Susan Byrne recently shared with Money Magazine the best investment advice she ever received. Susan, the founder, chairman and chief investment officer of Westwood Management, learned while she was managing other people’s money but doing a poor job with her own assets, to keep her hands off her 401(k) except for once a year.
It’s often best to keep your eyes and hands off. Stick to your asset allocation strategy and rebalance the portfolio annually, automatically if possible.
Perhaps this is true for more than just investments, but I’m often tempted to touch things I can see. I’ve stopped looking at my investments daily, but the next step is to determine an asset allocation and stick with it. Are you tempted to change your strategy, particularly when you see your balance declining from day to day?
The smartest advice I ever got, Money Magazine