The No. 1 mistake IRA contributors make, according to experts


When the market gets bumpy, it's natural to want to check in on your investment accounts. Resist that urge.

Constant monitoring is "going to make you crazy," says Marguerita Cheng, a certified financial planner and the CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland. In fact, checking your retirement account balance too often is the No. 1 mistake IRA contributors make, Cheng says.

Tim Casserly, a certified financial planner at Arista Wealth Advisors in Albany, New York, agrees. "When you check the market performance day to day, it's easy to forget you have a 40-year time horizon," he told Grow earlier this year. That can lead investors to make panicked moves with costly consequences.

Your aim should be to check in just often enough to make sure you're on track to meet your goals, while staying committed to your long-term investment strategy.

Here's how advisors suggest you do that.

Every three months: Review your account

Experts typically recommend you check your portfolio balances no more than quarterly. Even then, your plan should be to review, without necessarily making changes. Remind yourself that volatility is normal and don't lose sight of the fact that the long-term historical average annualized return for the S&P 500 is almost 10%.

"The markets will have some downs — but historically speaking, the ups outweigh the downs," Casserly says.

Every six months: Adjust your investment mix

Once or twice a year, advisors recommend tweaking your investment mix to bring your asset allocations into line with your long-term plan. That move, called rebalancing, is meant to manage your risk while producing returns that keep you on track to meet your goals.

The right mix of investments will depend on factors like your age and risk tolerance. Baltimore-based money managers T. Rowe Price suggest these goals:

  • In your 20s and 30s: 90% to 100% in stocks (because of your long investment timeline), with up to 10% remaining in bonds.
  • In your 40s: 80% to 100% in stocks, with up to 20% remaining in bonds.
  • In your 50s: 60% to 80% in stocks, 20% to 30% in bonds, and up to 10% in cash.
  • In your 60s: 50% to 65% in stocks, 25% to 35% in bonds, and 5% to 15% in cash.

Don't let current market conditions sway you into mistakes like taking money out of the market. "Your IRA is a long-term investment vehicle," Cheng explains, "and you don't want to take your long-term money and invest it with a short-term time horizon mindset."

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