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Don’t Look at Your 401(k)? Good Luck With That!

By Mark Gongloff

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My son’s Greenlight investment account has a feature that lets kids buy stocks and exchange-traded funds. Obviously aware of my financial genius, he recently asked me what stocks to purchase.

I chuckled sagely and told him, “No, no. Don’t buy individual stocks. That would be foolish. Instead, buy a low-cost index fund and sit back and watch your riches accumulate.”

So we took the $40 in his Greenlight account and bought a Vanguard S&P 500 ETF. That was about a week ago. As of this writing, his $40 was worth $35.64, a one-week loss of roughly 11%. So much for my financial genius.

What makes this particularly painful is that my son and I can open the Greenlight app on our phones at any time of the day or night for an update on just how poorly I have timed the market.

I will tell this to my son until I am blue in the face: “Just don’t look at it. Pretend it doesn’t exist. Maybe we’ll buy more of the Vanguard S&P 500 ETF when it gets really cheap. By 2023 or 2024 or the time when the Sun swallows the Earth, you’ll have your $40 back and then some.”

It’s the advice we’re all getting these days about our 401(k) retirement accounts amid the market’s gut-wrenching declines, the same advice we always get when all the money is on fire and the same advice Indiana Jones gave Marion Ravenwood at the climax of “Raiders of the Lost Ark”: “Don’t look at it. Shut your eyes and don’t look at it, no matter what happens.”

‘Prone to Panic’

Still, it’s possibly the soundest advice you can get. People who ignore it are prone to panicking and making even bigger mistakes than buying an S&P 500 ETF right before the market drops.

For all the benefits of the  democratization of finance that gave the masses access to the markets on the cheap, the unavoidable downside is that it is impossible to ignore the market’s flailings any more.

In olden times, you had to use a “telephone” to speak with a “human” broker to check on your portfolio, if you weren’t willing to wait for the “postal service” to deliver your monthly or quarterly statement. Maybe you caught up with the broad strokes of the market on the evening news or in the morning paper.

Now you are bombarded with incremental market news 24 hours a day whether you want it or not, including in text messages and pinging alerts demanding attention. Your portfolio is right there on your phone, in your pocket, begging to be checked at all times.

App-Based Trading

Along with my Greenlight app, I have a Fidelity app I am studiously ignoring. Google Trends shows search interest in “Fidelity app” popped right around the time of the first Covid market crash in March 2020 and has stayed elevated ever since.

That was also the start of the golden age of the Robinhood trading app and its many competitors, some of which seem designed to give users a dopamine rush with every market twitch.

Just as this relentless flow of information inspired people to FOMO-buy on the way up, it can make people panic-sell on the way down.

As Barry Ritholtz, the host of Bloomberg Radio’s “Masters in Business” podcast, pointed out on Twitter, the meme-stonk fads fueled by Robinhood and the like are suffering even deeper losses than my son’s Vanguard S&P 500 ETF.

With Bitcoin down 50%, the ARK Funds off 67% and NFTs nearly erased in value, no wonder everything feels terrible.

Such spectacular flame-outs make everybody even antsier about checking their portfolios. But this also makes the advice to ignore them, or at least not panic about them, even more imperative. Although it may be harder than ever these days, maybe it will also be more rewarding than ever.

Mark Gongloff is a Bloomberg Opinion editor and writer of the Opinion Today newsletter. A former managing editor of Fortune.com, he ran the HuffPost’s business and technology coverage and was a reporter and editor for the “Wall Street Journal.”

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(Image: Adobe Stock)

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