Why I Rarely Look at My Retirement Savings Account’s Balance

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I recently looked at my 403(b) plan, which is the equivalent of a 401(k) plan, for the first time in approximately six months. Even with the market’s recent correction, my portfolio was fine. Now that I’ve looked, I don’t plan on checking it again for another six months.

Sounds heretical, doesn’t it? A financial professional not looking at his account?! I’d argue there is bliss in controlled ignorance. Not knowing what the balance is, and quickly forgetting it once reminded, helps to avoid anchoring. I’m neither shocked nor surprised when I do look at my account balance because I don’t remember exactly what it was the last time I looked.

Keep in mind that I am aware of what is going on with my account. Vanguard emails transaction statements when my payroll deductions are deposited so I know when activity has occurred. I just don’t know what the account balance is. (The same applies to my other brokerage accounts.) And that’s good because I should focus on the process and not the short-term results.

Think about it. What control do you or I have over how the asset classes we invest in perform? Here’s the answer: none. We can choose what we invest in. We can choose how much we allocate to each asset class. We can decide when we get in and when we get out. We can even choose the vehicle (a stock, a mutual fund, an ETF, etc.). We cannot choose the return we’ll get. That’s completely beyond our control.

So, why focus on the account balance? Looking the number frequently won’t make you a better investor.

What will make you a better investor is the process you follow. How much are you setting aside for retirement and other future expenses? Are you contributing to your savings frequently? If you are retired, are you limiting portfolio withdrawals to a sustainable level? Do you have a disciplined, well-thought-out plan you can stick to regardless of what the market is doing? Have you set up the proper barriers to limit the effect emotions will have on your portfolio? Is your portfolio properly allocated given your financial goals, investment time horizon, financial tolerance for risk and your emotional tolerance for risk? Do you have clear buy and sell rules for the securities and/or funds you invest in?

These are the type of things you should focus on. They are within your control. What the financial markets do to your account balance isn’t.

When I actually do look at my accounts, it’s with a purpose. I check my 403(b) account to see if I need to rebalance. I use an equal-weighting methodology with a target allocation of 20% for each of the five funds I hold in my portfolio. I specifically check at the end of April and the end of October (the separation points between the best and worst six-month periods for stocks) to see if any of the funds’ weighting is more than five percentage points above or below target. If so, I rebalance. If not, I do nothing and then don’t look at the account again for another six months, with the exception of monitoring the transaction email notifications.

As far as my recent check goes, it turns out that I didn’t need to do anything. An error in calculating the fund weightings caused me to rebalance. I calculated one fund as being five percentage points off target, when it was really just one percentage point off. It was a silly (but fortunately minor) mathematical error on my part, and an example of how even those of us who regularly write about finance aren’t perfect. In response, I’ve set up a spreadsheet specifically designed for the account that will automate the calculations to prevent the error from recurring in the future. In investing, as is the case with many other activities, process is important.