Federal employees, let’s talk about your Thrift Savings Plan (TSP) and other investment accounts. Be honest—how often do you check your balances?
- If you’re logging in more than once a month, it might be time to rethink your approach.
- If you’re peeking more than once a week, we need to talk.
- If you check it daily, we need an intervention.
While it may feel responsible, constantly checking your account could actually hurt your long-term success.
Wait, how can checking my balance be a bad thing?
The Problem with Constant Monitoring
With the TSP’s user-friendly interface and app that let you see your investments with a few taps, it’s easy to check your account anytime. Watching your balance grow (especially after those big agency contributions!) can feel great. But it can also become a habit—and not necessarily a healthy one.
Many people even see this habit of monitoring as a sign of being financially responsible. After all, in most areas of life, paying closer attention usually leads to better outcomes, right?
More is not more: Why is investing not the ICU?
Let’s for a moment switch fields and move to an area that does require hyper vigilance: The Hospital Intensive Care Unit. (ICU)
In a hospital ICU, constant monitoring is literally a life-or-death matter. Doctors and nurses are always nearby, and machines track every little blip and beep to catch problems before they get worse. That level of vigilance is required. Anything less will not suffice.
But here’s the thing: your TSP is not an ICU patient. In fact, micromanaging the “patient” may actually do more harm than good due to one factor: Loss Aversion.
Loss Aversion: Why We React Poorly to Market Swings
As humans, we are hard-wired to be risk-averse, to protect ourselves, and to survive. If you go back tens of thousands of years ago to the time when we hunter-gatherers on the plains of the Sergenti, it paid (with your life) to be hyper-responsive to risks. The world was a dangerous place.
If you thought you heard a lion nearby, you hid. You didn’t debate the decision, analyze charts and graphs.
You ran. Every. Single. Time.
In that world, survival required constant monitoring. Just like the ICU.
Fast forward to today. We’re no longer dodging lions but investing in our retirement. Yet, we have still the same operating system. Our brains still react to perceived threats in much the same way.
Psychologists call this “loss aversion,” and it states we feel the pain of a loss much more intensely than the pleasure of an equivalent gain.
Studies show the emotional impact of a loss can be as much as two to three times stronger than the joy of a similar gain.
For example, losing $50 feels up to three times more intense than winning $50 feels good. Think about your own world, how do YOU react when you see your account drop?
So, when does loss aversion rear its ugly head?
The more we “see” loss. When do we “see” loss?
When we repeatedly check the account.
There are no “paper” losses for the brain. When checking leads to bad decisions.
Here’s what happens when you check your account too often: you’re bound to see days when your balance is down. Even though this is totally normal for the market, and you tell yourself it’s only a loss on paper, your brain is actually telling you to worry.
Here’s the key point: Even the market over the long haul has been shown to grow substantially, the probability of gain on a daily basis is slightly better than a coin flip. According to most historical data, it’s up 53.7% of the time.
What about the other 46.3% of the time? It’s down. And don’t forget, we feel losses 2-3 times greater than the gains. So, if you check regularly chances are that you will be at an emotional deficit…even if you are winning more than losing.
Do this enough and over enough years and your emotional resilience will erode, and you may feel the urge to “run to safety,” go to the G-Fund, potentially at the wrong time. You’ll even console yourself that you’re just being prudent, but that’s your loss aversion talking.
As Warren Buffett famously said, “The stock market is a device for transferring money from the impatient to the patient.”
So how do you create the conditions for patience?
The Solution: Embrace laziness. Check less, stress less.
So how do you break the habit of over-checking your accounts? Here are three simple steps:
- Remind yourself that “not checking” does not mean “not caring.” You don’t need to babysit your portfolio. Unlike the ICU, daily changes in the market don’t actually give you useful information. Trends take time to develop, think weeks, months, or even years. Trust the process.
- Make it harder to check your account.
This may sound sacrilegious, but you could delete the TSP app from your phone or log out after each session. Checking your balance can become as mindless as scrolling through social media. Adding small barriers—like needing to log in on your computer—can help break the habit. - Focus on learning, not checking.
Instead of obsessing over your balance, subscribe to a blog or read books by great investors. Notice, I didn’t say read the financial news. A good blog on the fundamentals of investing will instill habits of successful investing, making you less tempted to react emotionally to short-term market changes.
Remember: You are human.
Investing is a long-term journey. If you are human, and we all are, you are hardwired for loss aversion. It’s not your fault; the more you check those balances, the more you could trigger that human need for security because those “lions” are lurking.
So, give yourself (and your investments) a little breathing room. Check in occasionally to make sure you’re on track, but don’t let daily ups and downs dictate your strategy. Over time, your lack of attention may help your strategy and perhaps give you a little more peace of mind.
Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. This material is for general information only and is not intended to provide specific advice or recommendations for any individual.
There is no assurance that the views or strategies discussed are suitable for all or that investors will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and does not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
The Standard & Poor’s 500 Index (S&P 500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries
