Is It Okay to Just Ignore My Investments for Months?

You’ve probably heard about them, the so-called “oblivious investors” who just pour money into a stock fund and tune out the news of the day.

They seem to do fine, or at least they seem happy. So is it okay to invest blindly and simply not pay attention to the stock market?

First let’s consider what impact, if any, you might have on the stock market if you do pay attention, day in and day out. Will the fact that you are following a given company make its stock go up (if you own it) or down (to a point where you might like to buy it)?

Of course not. Yet investors tend to focus very hard on a small number of companies. They track them with smartphones and worry endlessly as the price ticks up and down every day.

What about earnings reports and material events that might change your investment outlook?

Well, here’s the thing: There are a lot of people watching this information, all the time. Most of them are highly paid professionals. And the pros know something fundamental that small, retail investors tend to forget.

And that is “Buy the rumor, sell the news.” Mostly, full-time professional traders are not going to react to a report of increased earnings or a change of managers.

Rather, they are plugged into a nonstop rumor machine and constantly peruse whatever tea leaves they can find to figure out what’s coming before it’s announced. Most big stocks trade heavily prior to an expected news release, then settle down quickly soon after.

Do you have the time and energy to do that job, on top of your actual job? Probably not, and there’s no guarantee you would do it better than the professionals anyway.

In fact, for most large, widely held common stocks the information flow is so pervasive and so public that there’s no need to try to determine prices. You can rest assured that the current live market price already reflects whatever information is available and all of the rumors as well.

Guesswork

But what about your overall portfolio? Surely that needs tending on a regular basis?

Well, if you’re a seriously disciplined long-term investor, no, it does not. The more moving around of assets you do in a portfolio the more costs you incur.

It might seem sensible to try to get ahead of a seasonal trend or a change in the temperament of other investors, but even that is nothing more than fancy guesswork.

Will growth stocks outperform value stocks? Will bond yields go up? It is time to put more money into foreign shares?

Here’s the thing. A truly disciplined long-term investor owns both growth and value, both bonds and foreign stocks. Exact amounts of which are debatable and relate to your goals, but once you set those amounts it’s often best to leave well enough alone for a while, unless goals change.

Just rebalancing once or twice a year — selling some of the investments that happened to go up and using the money to buy those that happened to go down — is plenty enough activity. Doing so means you capture real gains and buy other things while they’re cheap.

Which are expensive and which are cheap is a matter for your set investment targets, not the attitudes of other traders or the beginning of a travel season or a holiday slowdown or whatever reason you come up with to trade.

Yes, it’s oblivious. It’s also effective, and you just might be happier, too.

MarketRiders, Inc. is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.