Investing should be boring—assuming what you care about is growing wealth over time.
Unfortunately, that’s not the message you get from daily market commentary, which tends to focus on the short-term ups and downs in the markets.
These are suited more to financial thrill-seekers than to long-term investors.
Every once in a while, however, you will see an article that properly focuses on long-term investing and calls out the perils of frequent trading.
One such article, written by Jason Zweig of the Wall Street Journal, is worth a read.
Let’s look at a few excerpts.
The peak of a bull market and the bottom of a bear market have one thing in common: Buy-and-hold investing starts to feel like a waste of time.
Just look at how many investors seem unsatisfied that stocks are merely setting record highs day after day. They want more and more, faster and faster.
This reminds us of a line from the Queen song, I Want It All.
I want it all, I want it all, I want it all, and I want it now
It’s a great song, but terrible as investment advice.
The article points out how a number of members of Congress trade stocks excessively—or direct their financial planners to do so on their behalf.
But check out what [congressman] Bresnahan said when asked if he would tell his financial planner to stop trading his assets so often.
“And then do what with it?” he said. “Just leave it all in the accounts and just leave it there and lose money and go broke?”
It’s alarming to think that any member of Congress could have made this statement.
So, what do clients of financial advisers want?
You should hire financial advisers to provide financial advice. Instead, clients often want them to perform a magic show: the illusion of being able to beat the market.
One of the greatest challenges financial advisors face is educating their clients, especially promoting patience and a long-term approach, given the number of “pseudo-experts” claiming they have the secret to beating the market.
Investing can be an enterprise, or it can be an entertainment.
Investing as an enterprise is a lifelong endeavor to build wealth with patience and prudence; your long-term odds of making money are close to 100%.
Investing for entertainment is a roller-coaster ride of trading ups and downs. It’s sure to give you thrills in the short run but likely to leave you shaken in the end; your long-term odds of making money are close to zero. That’s why fast money should be, at most, only a tiny slice of your portfolio.
Check out the odds of making money: 100% if you view investing as an enterprise and 0% if you view investing as entertainment.
Summary
It’s a bit unusual, but every once in a while you see a well-crafted investment article that focuses on the benefits of long-term investing.
Crazy bets may be thrilling, but they are definitely crazy.
Best regards,
Stuart & Sharon