Should You Be a Micro-Managing Investor?

Anna Williams
Posted

Micro-Managing Investor StudyAre you the meddling type? Cool it. When it comes to your portfolio, sitting back and taking a more hands-off approach could actually increase your returns, according to a recent study by the Vanguard Group.

The study finds that investors who frequently shift money between funds fared considerably worse over a 5-year period than those that stayed the course.

The magnitude of the study is particularly impressive. The study analyzed more than 58,000 Vanguard IRAs for five years ending in 2012, which included the volatile period of the recent economic crisis.

“Even disciplined investors who wisely engage in periodic rebalancing can find their resolve tested by extreme market conditions,” wrote Stephen Weber, who conducted the study. For those with that tendency to meddle or mess with a portfolio, Weber recommends that investors seek out a financial adviser as an “emotional circuit breaker” who will help to curb your impulses.

Overall, the new study is a good reminder of a tried-and-true theme: that making an  investment plan—and sticking with it—can minimize your chances of making a mistake.

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