Don’t Make Big Investment Decisions Monday Morning — Here’s the Data Behind It
Written by
Marc Guberti
Edited by
Zuri Anderson
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Many investors advocate for spending time in the market instead of timing the market, but the timing of when you make investment decisions can still play a key role in your lifetime returns. While the middle of the week is great for making decisions, especially if you make those decisions in the evening, Monday mornings might be the worst time to make trades.
Deciding to buy or sell stocks at this time can lead to significant mistakes that reduce your lifetime returns. Some people panic sell on Monday morning, while others rush to buy a stock that they don’t know enough about.
GOBankingRates uses research to break down why making decisions Monday mornings could be detrimental to your investment portfolio.
Stress Is Higher
Mondays, in general, aren’t a good day of the week for most people. This day of the week is linked to increases in stress and health risks, two things that can result in bad decisions.
Monday disrupts people’s sleep cycles since it’s a departure from the sleep cycles people embrace on weekends. It’s part of the reason why people feel more fatigued at work, and that results in reduced mental capacity to make good decisions.
Combine all of these headwinds with something as stressful as following stock prices, and it’s easy to see how making big portfolio moves on a Monday morning can lead to losses. The only exception is if you maintain the same sleep cycle each day, including on weekends. Then, you won’t be as stressed on Mondays.
People Consume More News Over the Weekend
Monday morning’s timing with sleep cycles isn’t the only reason it’s the worst time to trade stocks. The weekend leading up to Monday morning is just as important since more people have time to watch the news and check their social media feeds.
The U.S. Bureau of Labor Statistics found that people watch TV for an additional 45 minutes per day on weekends than on weekdays. This fact means an investor could have consumed news for additional hours compared to their regular weekday viewing habits. Furthermore, since the stock market is closed on weekends, it gives more time for news on individual picks, financial markets, the global economy, and geopolitical events to build up in a person’s mind.
All of the weekend news can result in more dramatic price swings on Monday morning, which can amplify feelings of fear and greed, depending on how the stock market is moving and your current sentiment.
Volatility Is Bad for Decision Making
Evenings in the middle of the week are some of the best times to make investment decisions since you have more time to reflect and consider what is driving the stock market. While the stock market doesn’t move much after hours — unless a company comes out with an earnings report — most stocks are volatile on Monday morning.
Bid-ask spreads are less favorable for everyone due to the high demand, and all of the price movements can cause people to panic sell. Our brains are designed to address present threats, per Aldrich Wealth, instead of thinking decades into the future. Volatility is a present threat, and if you have to make decisions during significant price fluctuations, it can result in an emotional decision and lower returns. Some investors end up realizing losses that would have turned into gains if they were more patient.
If you have to make a decision on Monday, wait until the afternoon or early evening. That way, most of the morning volatility is gone, and you can increase the likelihood of making a good decision. If you can wait until Tuesday, Wednesday or Thursday to make a big investment decision, that’s even better.
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