Don’t Look Now (Literally!), But Markets are Up

Markets are up, but you may want to hold off on reviewing your investment account statement.

By Ben Dolan

According to the Wall Street Journal, on Friday of last week the S&P 500 closed at 4409.59, just shy of a 15% gain for the year. This is well above its long-term average of 10.1% from 1926 through 2022 (as reported by Dow Jones Indices LLC). However, of the major US indices with gains in 2023, the S&P 500 is not leading the way. That honor goes to the tech-heavy Nasdaq, which is up over 30% year-to-date.  

With all these gains you’re probably tempted to look at your investment account statements more often. If so, you may want to think again.

In her WSJ article this past weekend, Anne Tergesen outlines the potential negatives of looking at your investments too often when markets are up: “When it comes to logging into a 401(k) to check the balance, less is always more whether the market’s up or down. The quick dopamine hit of seeing a bigger balance can be habit-forming and lead some to make risky moves with their money…

The more people look at their 401(k)s, the lower their long-term returns are likely to be, according to two landmark studies from behavioral economists Shlomo Benartzi and Richard Thaler. They found that investors with distant goals who resisted the temptation to monitor the market earned significantly higher profits over time than those who checked annually.”

In short, Thaler and Benartzi are reviewing investor behavior post the dopamine hit that comes from checking balances too often. Some get overconfident and load up on stocks, putting them out of risk tolerance. I wonder if they can handle the inevitable volatility.

Others get too conservative, thinking the bull market in stocks won’t continue. This happened in 2021, following the bull market of 2020. According to a recent report by Dalbar, in 2021 the average equity mutual fund investor earned 18.39%, compared to the S&P 500 return of 28.71%. That’s a whopping 10.3% difference, in just one year!

The question is, despite what’s happening in markets (up or down), do you have the fortitude required to not let fear or greed creep in? When let in, they typically hurt returns, not help.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The market and economic data are historical and are no guarantee of future results. All indices are unmanaged and may not be invested into directly. The information in this report has been prepared from data believed to be reliable, but no representation is being made as to its accuracy and completeness.

Nothing in this material should be construed as investment advice offered by Dolan Capital Advisors, Inc. This market commentary is for informational purposes only and is not meant to constitute a recommendation of any particular investment, security, portfolio of securities, transaction, or investment strategy. No chart, graph, or other figure provided should be used to determine which securities to buy, sell or hold. No representation is made concerning the appropriateness of any particular investment, security, portfolio of securities, transaction, or investment strategy. You should speak with your own financial professional before making any investment decisions.

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Ben Dolan and Michael Foster are investment advisor representatives of Dolan Capital Advisors a North Carolina state-registered investment adviser. Investment advice offered through Dolan Capital Advisors, Inc.