Why Smart Investors Ignore Daily Market Noise

While it’s natural to want to keep a close eye on your brokerage account or 401k, frequently checking market movements can actually be counterproductive. This habit, although common, might lead to hasty decisions that could undermine the long-term growth of your portfolio.

It might also just be a waste of your time, especially if you’re years away from retirement and don’t plan to use those funds anytime soon. Instead of getting caught up in the daily swings of your portfolio, why not focus on a few more productive tasks that can control and can positively impact your plan? Doing so can reduce stress, save time, and help you feel more financially confident and secure in the long run.

Why Following the Stock Market Can Be Harmful

The stock market is a constantly changing entity, influenced by factors such as investor sentiment, geopolitical events, corporate developments, and economic policies.

As an investor, you have a personal connection to your portfolio, which can make it hard to watch the fluctuations in real-time. The more you watch the markets, the more inclined you may feel to do something impulsive or short-sighted, like sell a stock that’s dropped in value or move your money out of the market altogether.

However, the purpose of investing (in the words of Warren Buffett) is to reward the patient. It’s a long game, and for those who are willing to stick out the short-term volatility, the potential for growth is high.

We can say this confidently for a few good reasons. Since the beginning of the S&P 500, investors have endured numerous global catastrophes and market crashes, including:

Multiple world wars
Natural disasters (hurricanes, tsunamis, wildfires, etc.)
Global pandemics
Presidential assassinations, impeachments, and scandals
Widespread financial crisis
High inflation

Yet, eventually, the markets have always recovered and (eventually) trended upward. When you have time on your side, historical performance indicates that recovery will eventually come around—it’s cyclical in nature, after all.

What to Focus on Instead of the Ups and Downs of the Market

1. Prioritize Your Savings

You have an awful lot of priorities vying for your wallet’s attention, which can make saving especially difficult. That being said, saving is a critical component of any sound financial strategy. The more you have set aside for unexpected expenses and emergencies, the less you’ll need to draw down from your other funds (like your retirement accounts, brokerage accounts, or other sources). Savings give you flexibility and security—making them an invaluable piece of your financial puzzle.

It may help to start simply by establishing an emergency fund (if you don’t already have one). The general rule of thumb is to set aside enough savings to cover six months’ worth of expenses.

Once you have that going, you can focus on short-term savings goals like a vacation fund, a down payment on a house, a new car, etc. It’s important to continue contributing to long-term goals as well, like retirement and college tuition.

2. Plan for Retirement Now

After several tough years marked by high inflation, a significant 57% of Americans feel they’re not on track with their retirement savings. Even more troubling, the average retirement savings is only $88,400 per individual—yet people believe they’ll need around $1.46 million to retire comfortably.

The key takeaway? Start saving for retirement as early as you can. A great way to simplify this process is to automate your savings. By setting up automatic deposits into your after-tax retirement accounts with each paycheck, you effortlessly build your future without having to manage each transaction.

This system ensures that you’re always saving, and it’s money that you never see in your checking account—so you don’t even have to miss it. You can always adjust the amount of your deposit if necessary, which may be a good idea to do about once a year (or anytime you receive a promotion or raise).

3. Invest in the Market for the Long Term

Whether you’re saving for your child’s college education in a 529 Savings Plan or putting away money for retirement, you should be thinking in terms of decades, not years. Trying to make money with short-term investments (aka day trading or active investing) is risky, to say the least.

Keep in mind long-term investing may come with a greater time horizon than you realize. If you intend to use the funds in five to 10 years, that’s actually considered medium-term investing, not long-term. Believe it or not, a bad stretch of market returns can last a full decade (think the 2000 Dot-Com Bubble burst all the way through the 2007-2010 Global Financial Crisis). If that happens, it can certainly impact your ability to achieve your goals.

Keep a Forward-Focused Perspective and Ignore Short-Term Movements

To put it simply, there’s no point wasting your time listening to the noise and chatter about today’s market volatility and movements. Instead, invest in balanced, low-cost funds that will stay with you for the long haul.

Planning for the future requires a ton of self-knowledge, a clear vision of your options, and a firm resolution to stick to a plan. Need help with that? Lake Road Advisors would be happy to explore your financial questions. Schedule a consultation with our team today.

Sources:

Lake Road Advisors, a Fee-Only, independent financial planning firm with offices in Corning, NY, Ithaca, NY and Vancouver, WA works with clients virtually all across the country. Paul Sydlansky, the founder of Lake Road Advisors LLC, has worked in the financial services industry for 20+ years. Prior to founding Lake Road Advisors, Paul worked at Morgan Stanley in Manhattan for 13 years. While at Morgan Stanley, Paul was a senior-level manager within the Institutional Equities Department. In 2018 he was named to Investopedia’s Top 100 Financial Advisors list. Paul received a Bachelor’s degree in Economics from Marist College and holds an MBA from New York University Leonard N. Stern School of Business. Paul is a CERTIFIED FINANCIAL PLANNER™ and a member of the National Association of Personal Financial Advisors (NAPFA) and the XY Planning Network. They can be reached by phone at the Corning, NY office at (607) 463-8400, Ithaca, NY office at (607) 438-2914, or Vancouver, WA office at (607) 292-2172 or at the firm’s website at https://lakeroadadvisors.com.

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.