Simplicity Is Important in Life & Investing


@BenjaminGJW Tweeted;

The new wave of gurus, circa 2020:

  • Brush your teeth
  • Wash your hands
  • Wear clothes
  • Wake up before noon
  • Learn your multiplication tables

I took the Tweet being about the extent to which we're moving away from some pretty basic life skills/habits like younger people not only not driving cars but not learning how to drive cars (I am part of the cohort that will never understand this).

I retweeted it, adding eat less sugar lift weights, live below your means, learn how to fix some things around your home (w/your own tools). Neither list is comprehensive necessarily but they are all basic things that we should do or know how to do; very basic, very simple.

So it is with investing; very basic, very simple can get the job done. What are the primary ingredients to investment success? I would say a proper asset allocation (proper in terms of your particular situation) and the avoidance of self-destructive behaviors like various forms of panic.

Cullen Roche had a post about avoiding behavioral mistakes by only checking your portfolio very infrequently. He correctly notes that in 1987 the stock market was up for the year despite the crash. It's a good quick read but here is a brilliant line from the post;

This is one of the great paradoxes of investing – the more you pay attention the more behavioral risk you create for yourself.

If you put every nickel into a broad based equity fund (lump sum or dollar cost averaging) and check back in 20 years your account will be worth much more money. You wouldn't know about the various 10%, 20%, 50% drops along the way you would just know that you had more money and likely would be pleasantly surprised.

There are plenty of reasons why this approach would be sub optimal but it would not be a truly terrible way to go, it can be that simple and so whatever course you actually set out on needs to be considered against the realistic possibility that doing nothing but staying in for 20 years will lead to a higher balance without much effort.