Friday, March 22, 2013

Standing Pat, Planning the Long Game

And now an investment post, since we're overdue.

Four years ago, a sixty-something member came into the office, and he was agitated.

We were in the middle of the financial meltdown, and his broker/financial advisor had his investment stash mostly in stocks. Given the member's age, I thought this was nuts. And said so.

The guy wanted to jump out of his stock positions and get into CDs and bonds. The broker wanted him to stick with the stocks. I didn't take a position.

In retrospect, I should have emphatically agreed with the broker (even though the broker was misguided with the man's asset allocation.)

Because ...

The Fine Art of Doing Nothing

Don’t just do something, sit there!

I love that purposefully juxtaposed Yogi Berra-ism.

I have been thinking about nothing on this lovely Friday morning. More precisely, why doing nothing — or at least much less — is better for your long term investing outcomes than doing something, also known as more.


Don’t do something, anything, just for the sake of it. If you are going to do something, you better have a damned good reason for it.

Doing something feels good. Doing something creates the illusion of control. Doing something responds to the angst we feel when we are unhappy with current circumstances.

Doing something is why people dump all of their stock at market bottoms; please-just-make-the-pain-stop-sell it-I-don’t-care-if-this-is-the-low was heard quite often in February and March 2009.

I have been thinking about nothing recently, mostly in the context of time frames (a post I did a few weeks ago, expanded into a full column for Sunday).

Humans exist in the here and now, at the intersection of past and future. The present is all they really know from experience. Contextualizing the long game is not their forte. What 24/7 media fills their minds with is so much meaningless detritus, so many useless options — its why they often forget that nothing itself is a viable choice. Indeed, nothing is often the best choice available. ...

I have spent years overthinking and over-analyzing investment options. I do too much slicing and dicing, putting money into that stock fund and this bond fund until I have twelve or fifteen funds stacked up like lumber at a busy construction site.

And I have been guilty of chasing after "hot" funds and bailing out of cooler funds, and generally running with the lemmings.

It took the financial fustercluck that occurred in 2008-2009 (otherwise known as the Great Recession) to force me to get my financial head on straight. For once, I didn't run screaming from my plunging stock funds. Instead I gritted my teeth and muttered "Ignore it, ignore it, please God let me ignore it ..."

And lo. Four years later, the funds I owned were back to even ... and I (at last) learned the beneficial art of doing nothing.

Moral: Set up a financial plan that is right for your head, your nervous system and your circumstances. And stick with it.


F. Kousac said...

AMEN, brudder.

I've invested conservatively, and spread my investments across a broad array of stocks, bonds, property, and other things. Although the bush economic debacle scared me, as it did many, I stayed calm and made VERY few changes in my stance. Thankfully.

Chasing "hot stocks" and putting all your eggs in one basket affords little room for change, which there will always be. It's afforded me time to reevaluate the industry, and the changes it's going through.

Invest conservatively. Spread the love. Listen to Steve.

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