Market Overview

How High-Frequency Monitoring Can Be A Short-Sighted Behavior

How High-Frequency Monitoring Can Be A Short-Sighted Behavior

By Dan Egan, Betterment

There are 10 million bits of information moving through this space every second.¹ 

And it poses a subtle threat to your investments. It’s not high-frequency trading—it’s closer to home. It’s high-frequency monitoring, driven by your own brain.

The more frequently you check on your investments, the worse they will likely appear to be performing. So the more frequently you monitor, the less likely you are to be investing correctly for the long term. And it’s getting harder not to look—we are prone to look at our smartphones, home to your money and finance apps, up to 150 times a day.²

While it may seem like good stewardship to frequently log in to your account to check on your performance, in reality this is likely to:

●     Stress you out

●     Encourage you to tinker with your investment allocations

●     Hurt your investment performance

Yes, all three. Research has shown that the more investors monitor their portfolio, the more risky they perceive investing to be—a phenomenon known asmyopic loss aversion.

Over-vigilance also gives investors more opportunities to react to short-term returns by changing their investment strategy.

It’s a statistical artifact of the stock market that the more frequently you monitor your portfolio, the more likely you are to see a loss since you last looked. This fact, taken in combination with loss aversion, has been proposed as the reason the equity risk premium is so high.

An investor who checks his or her portfolio quarterly instead of daily reduces the chance of seeing a moderate loss (of -2% or more) from 25% to 12%. And that means he or she is less likely to feel emotional stress and/or change allocation.


Evidence supports the idea that myopic loss aversion reduces investor returns. “Investors who got the most frequent feedback (and thus the most information) took the least risk and earned the least money,” according a study published in the The Quarterly Journal of Economics³.

Betterment uses technology to help customers behave themselves and avoid getting needlessly stressed out by short-term returns. One of the ways Betterment starts to improve investor behavior and sentiment is simply by measuring it first—something few other investment companies do.

In the chart below, you can see the distribution of “log in rates” amongst our customers across mobile and Web.


●     About 10% are superstars—they log in less than once per month. By doing so, they have reduced their chance of seeing a loss by about 6%.

●     The majority of customers (55%) log in less than once per week.

●     About 30% of customers log in between once per week and every other day. We are super flattered that they love our service so much… but when it comes to gauging investment returns, there isn’t too much information to be gleaned about your performance over such short periods of time.

●     Finally, we have the cases who might want to dial back on their investment monitoring—customers who log in at least every other day. These customers are likely stressing themselves out needlessly, without any improvement in performance.

Customers’ log in rates show the patterns behavioral finance would predict. The following characteristics correlate with a tendency of an individual to monitor his or her account:

●     Being male (8% higher)

●     Being younger (3% higher for age 30 and younger)

●     Less tenure with Betterment (4% per year)

●     Lower net worth

●     A higher balance

●     Using Betterment’s mobile app (much easier to check it, after all)

Note, however, that these are average demographic tendencies; there are young men in our customer base with high balances who do not log in often. Individuality matters.


Individuals who log in often may counter that they are systematically improving their performance by being more active and diligent. Unfortunately, this is rarely the case. Log in rate is usually associated with a higher behavior gap (i.e., losing returns because of market timing).

Investing is a rare case of generally earning more by working and stressing less. Rather than work against that, take advantage of it, and take a vacation from monitoring your portfolio.



³Thaler, R., Tversky, A., Kahneman, D., & Schwartz, A. (1997). The effect of myopia and loss aversion on risk taking: An experimental test. The Quarterly Journal of Economics, 112(2), 647-661.

This article originally appeared on Betterment.

Dan Egan is the Director of Behavioral Finance and Investments at Betterment, the largest, fastest-growing automated investing service, helping people to better manage, protect, and grow their wealth through smarter technology. Dan has spent his career using behavioral finance to help people make better financial and investment decisions. He is an author of multiple publications related to behavioral economics. He lectures at Columbia University, New York University, Wharton Business School and the London School of Economics on the topic.

Determination of largest automated investment service reflects Betterment LLC's distinction of having the most clients, based on Betterment's review of client numbers self-reported in the SEC's Form ADV, across Betterment's survey of RIA automated investment services. Determination of fastest-growing automated investment service reflects Betterment LLC's distinction of obtaining the largest number of new clients since January 1, 2014, based on Betterment's review of client numbers self-reported in the SEC's Form ADV, across Betterment's survey of automated investing services.

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