8 Signs You're a "Helicopter Investor" (And How to Stop)

By Tim Lemke on 1 December 2017 0 comments

We're all familiar with the term "helicopter parent" in reference to the mom or dad that hovers over every aspect of their child's life. Do you have a similar approach to investing? Do you obsess over every detail of your portfolio? Are you constantly checking in, even when it's clear your stocks are handling things pretty well on their own?

If so, you may be a "helicopter investor," and it may be costing you money as well as your peace of mind. Watch out for these warning signs. (See also: 11 Investment Mistakes We All Make)

1. You check your portfolio every day

How often do you log in to see your investment account? Are you checking in every day, or even multiple times a day? Monitoring your investments is important, but there's no real need to check in on them that frequently. Most people can get away with looking at things once a week, and could probably go months without a check-in as long as they are paying attention to broader market movements.

Checking your investments frequently might tempt you to fiddle with them. You might sell or buy stocks based on emotion. You'll get angry when investments go down slightly, and irrationally happy when they go up.

Consider setting a personal policy of checking your investments once a week (or even less) at a certain time, and have a plan for what you want to accomplish when you do. (See also: 5 Essentials for Building a Profitable Portfolio)

2. You watch a lot of financial news programs

Any smart investor should follow the news and be aware of market trends, but tuning in constantly to CNBC or another financial channel is completely unnecessary. If you want to tune in once to see where the market closes, fine. But you never want to find yourself watching for hours a day, reacting to every stock tip and piece of advice from a talking head.

Proper retirement investing requires time and patience. Watching too much financial news can lead you to think that every business event is more significant than it actually is. Unless you are a day trader or professionally manage a fund, you can do without the information overload. (See also: Want Your Investments to Do Better? Stop Watching the News)

3. You subscribe to too many financial publications

There are many great financial publications out there that can help you hone your investing prowess, but many of them also have similar content. Subscribing to one or two publications is useful, but subscribing to a half dozen or more or is overkill. This is especially true today, when there is a lot of solid advice available online for free.

Consider subscribing to one or two well-respected financial news sources to stay on top of the latest trends and market performance. Chances are, you'll make out just fine.

4. You have alerts on your phone

Smartphone apps have certainly made it easier to track and trade investments. I draw the line, however, in setting up alerts to tell you about the activity of specific investments. The average investor does not need to know, for example, that Amazon's stock just hit $180 per share, or that the market fell 1 percent on the day.

Ideally, your investments are working behind the scenes to make you money while you live your life. Turn off any notifications that would encourage you to check your investments more often than necessary. In fact, consider getting rid of the smartphone investing apps altogether.

5. You panic when investments decline

Guess what? Sometimes your investments lose money. They are not guaranteed to go up day after day. If this bothers you, and you find yourself buying and selling stocks while in the midst of emotional meltdowns, you may be a helicopter investor.

No one wants to see stocks decline, but if you are invested in the long term, you should be able to overcome a blip in the market. And any money you need within a few years shouldn't be tied up in the markets anyway.

If you're getting emotional every time you see stocks go down, do yourself a favor and back away from your computer screen. Breathe. Go do something else. Your portfolio will be fine, and you won't have to deal with the shame of making a bad situation worse by reacting in the moment.

6. You obsess over rebalancing

It's always a good idea to check your portfolio to make sure it's not out of whack. You don't want to wake up one morning and find that you're 85 percent invested in volatile tech stocks, for example. A properly balanced portfolio will be well-diversified and will match your risk tolerance.

However, most portfolios don't need to be rebalanced all that often. Remember that every time you rebalance, you are likely to incur transaction fees for every trade, and there may be tax implications as well. There's a cost to rebalancing too frequently. Once a year or once every six months for a rebalancing check-in should usually do the trick.

7. You're constantly going after the hottest thing

So you heard some buzz about Bitcoin, and now you want in. You saw Facebook's shares rise 5 percent in a week, so you jump. You're paying such close attention to your investments and the market that you're going after short-term hits rather than maintaining a long-term, disciplined approach.

Going after the hot thing often results in you buying high and selling low, which is the opposite of the ideal investing approach. It's fine to be generally aware of what's hot in the markets, but don't be like the cat going after the shiny toy.

8. Transaction fees and taxes are cutting into your gains

Buying and selling stocks has gotten cheaper in recent years, but most discount brokerages will still charge you at least $4.95 for every trade. So if you are constantly checking your portfolio and constantly buying and selling, this can add up. Consider that if you buy 10 shares of a stock at $50 a share, you've automatically given away 1 percent of your investment. If you are buying and selling smaller lots, that's an even higher percentage.

Additionally, selling stocks can come with tax implications if you are trading in a taxable brokerage account. If you sell a stock soon after buying it, you may pay a short-term capital gains rate, which can be as high as 39.6 percent.

Buying and selling stocks can be enjoyable, but if you do it too frequently, there's a cost involved. Hovering over your portfolio and constantly looking to trade can actually make a dent in your earnings over time. (See also: 4 Sneaky Investment Fees to Watch For)

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8 Signs You're a "Helicopter Investor" (And How to Stop)

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