Every day you’re inundated with information about investing. You’d be well advised to ignore almost all of it.
Responsible investing isn’t complicated. The securities industry and the financial media have a vested interest in conveying the opposite impression. Brokers want to make you believe you need their “guidance” because investing is “too complex” for you. The financial media wants to keep you in a high state of anxiety, focused on short-term news. The steady drumbeat of predictions and “breaking news” increases ratings and profits.
Let’s focus on what matters and what doesn’t.
What doesn’t matter
Ben Carlson penned this excellent blog post about things the market doesn’t care about. The list includes:
- How much you paid for an investment.
- How you “feel” about the market.
- The complexity of your investing strategy.
- Your trading history.
- Your experience.
- Your investing goals.
I would add the following:
- Predictions about the direction of the market, regardless of the qualifications of those making them.
- The “sentiments” of traders.
- Inflows and outflows from and into stocks and bonds.
- Whether companies are socially responsible.
- Political events (or non-events).
Read this sentence from this blog by Michael Batnick, and then post it by your computer so it will be a constant reminder: Creating the proper asset allocation and staying with it has a much bigger impact on your returns than selecting the best performing funds within those asset classes.
Note this advice has two components:
- Focus on your asset allocation (the division of your portfolio between stocks, bonds and cash); and
- “Staying with it.”
Here’s something else that matters. Costs. Costs include the management fee (called the “expense ratio”) of the mutual fund and the advisory fees and commissions charged by advisors and brokers. The formula is simple. You want to keep your costs as low as possible.
Thanks to an ongoing price war, it’s never been easier to put together a globally diversified portfolio of low cost exchange traded funds.
What really matters
Your health and your happiness. Divert the time you spend obsessively watching the financial media into activities that give you genuine happiness. Focus on your health. It’s almost impossible to be happy when your health is compromised.
The grim diagnosis John McCain recently received is a reminder that we’re here for a short time. Don’t squander your time on activities you can’t control.
You Can’t Adopt This Puppy, But…
Here’s what you can do and why I need your help.
Please go to https://www.youtube.com/c/danielsolin and subscribe to my YouTube investing channel.
You will have the satisfaction of helping investors retire with dignity, by providing them access to sound, academically based investing advice. It’s a wonderful feeling.
If you subscribe to my YouTube channel, I will give you a free, digital copy of my ground-breaking book, The Smartest Sales Book You’ll Ever Read. It’s my way of showing my appreciation.
Here are extracts from an unsolicited Amazon review:
Loved it. Loved it Loved it.
I bought the sales book not because I am a salesman, but because I was just interested in reading what Dan had to say about this subject. If you have read his other books, you know he gives very sound advice about investing and retirement. He is also a great writer…
Dan really boils down things what is most important in my mind regarding success and happiness. Each page jumps out with truths that are backed up by scholarship. I also enjoyed his personal stories very much which are down to earth and real.
Thank you for helping!
Resource of the Week
I recommend this blog post by Ben Carlson, referred to above. His website, A Wealth of Common Sense, lives up to its name.
This Week’s Video: A Free Lunch!
Not getting Dan’s weekly newsletter? You can sign up right here.