The democratisation of financial information has been, in most respects, a genuine advance. Investors today have access to real-time pricing, fundamental data, research, and analytical tools that would have been available only to institutional investors a generation ago. Yet the evidence on investor outcomes over the same period suggests that more information and easier access have not translated into better decisions. In many cases, the reverse appears to be true.
The paradox resolves when one distinguishes between types of information. Information about the fundamental economic characteristics of a business is valuable for investment decisions. Information about the daily price of a security is something quite different. It is not new information about the business; it is information about the current balance of buyers and sellers, which is predominantly a reflection of sentiment, momentum, and noise. Treating it as equivalent to fundamental information—and acting on it with the frequency that real-time access makes possible—is one of the more consequential errors in personal finance.
The research of Shlomo Benartzi and Richard Thaler on myopic loss aversion established this empirically. Investors shown annual portfolio returns were willing to accept more risk than those shown monthly returns, who in turn accepted more risk than those shown daily returns. The shorter the evaluation period, the more loss-focused the investor became, reducing their allocation to equities in ways that hurt long-run performance. Shorter evaluation periods expose investors to more frequent apparent losses, each of which triggers the loss aversion response.
Doing something—reacting to market developments, adjusting one's portfolio, acting on new information—feels like progress. In most domains, it is. But markets have a perverse property: they reward inaction disproportionately. The investor who does nothing—who holds a diversified portfolio, ignores daily fluctuations, and allows time and compounding to do their work—outperforms, on average, the investor who monitors closely and adjusts frequently.
The habit of daily portfolio checking is additionally problematic because it trains attention toward the wrong questions. The investor who checks prices each morning quickly develops views about short-term momentum, about which holdings are performing well recently. These views feel relevant but are almost entirely useless for long-term investment decisions. What matters for a ten-year investment is not whether a stock is up 3% this week but whether the business is generating and deploying capital effectively.
The discipline of limiting portfolio monitoring to quarterly or even annual reviews has a cost: it feels like negligence, like ceding control, like the abdication of one's responsibilities as an investor. This feeling is itself a product of the attentional bias that makes daily monitoring so damaging—the belief that closer attention produces better outcomes. For most investors in diversified, long-term portfolios, the optimal level of portfolio monitoring is substantially lower than they currently practice.