Prudent investing is boring. There is no excitement. It’s like watching paint dry. Except as Fred Taylor of Professional Associates wrote in a recent post, watching paint dry is too involved:
Even though this is my job, I’ll admit that I don’t watch the markets (closely) every day — largely because there’s no real need to and further, not following it minute to minute or hour to hour is good for reducing the stress level in one’s life.
Recently a close friend and client told me, “Tony I have been reading your weekly emails for quite some time and I beginning to find them boring.” Well guess what they will continue to be boring. Because prudent investing is boring but in the long run rewarding as well.
Jason Zweig recently retired from writing his weekly article for the Wall Street Journal after ten years. He stated that he was successful because he was able to convince his editor that his material was fresh. He also stated his message was the same each week. Prudent investing works.
Prudent investing can be summed up with three simple rules:
- Own equities and high quality short term fixed income.
- Globally diversify.
- Rebalance.
These rules may seem simple however most if not all investors cannot follow them consistently. During market extremes, both up and down, investors will panic and sell during extreme downturns. This is usually followed by concentrating their portfolio in the ‘hot’ sector/asset class/stock during periods of ‘hype’.
This is why working with an investor coach/fiduciary adviser is so important to your investing success. We need to be reminded over and over to follow the basics of prudent investing. Hence, the ‘boring’ weekly emails.
Each day we are bombarded with predictions about what will happen next in the market. We hear this from ‘experts’ our colleagues or friends and family. The financial media is filled with this investing pornography. We are all seeking information to predict what will happen next. We are all worried about the future and how it will affect us and our finances.
What we don’t realize is that the markets are random and unpredictable. Therefore this investing pornography is worthless. Although long term prudent investing is boring it is also rewarding.
Remember there have been market downturns in the past, some were very severe. There will be downturns going forward. The problem is no one can tell you with any consistency when these downturns will occur.
Patience and discipline are boring. Long term prudent investing is boring.
Stop the excitement, fire your broker/agent and hire an investor coach/fiduciary adviser.
