Ah, there’s nothing like making fresh, new resolutions in a fresh, New Year in which anything is possible. But while “anything is possible” may be personally invigorating, as investors, we crave just the opposite: We prefer certainty. Too bad it doesn’t exist, at least not as The Wall Street Journal columnist Jason Zweig has defined it in his wickedly insightful “The Devil’s Financial Dictionary”:
CERTAINTY, n. A state of clarity and predictability in economic and geopolitical affairs that all investors say is indispensable — even though it doesn’t exist, never has, and never will.
Certainty is nothing but a cognitive illusion: Just when you think you know what is sure to happen, the financial markets are about to prove that you are wrong.
Where does that leave investors? Instead of yearning for a unicorn, you are better off following decades of evidence-based insights on how to patiently pursue the market’s expected returns while realistically managing the uncertainties involved. Throughout 2015, we covered why this sort of investing means you should STOP doing a number of popular but misguided moves that are more likely to knock you off course than to contribute to your financial well-being.
We are nowhere near done covering the ways that investors are often their own worst enemies, so we intend to continue the theme in 2016. But first, we thought it would be helpful to serve up a summary of our 2015 “STOP Doing” posts. Especially if you missed them the first time, we certainly hope you’ll give them a read today.
Our 2015 Financial “Stop Doing” List
“Indecisively leaping from one investment trend to the next is one of the most expensive ways we know of ‘to do’ the market.”
“Most investors want to believe that, while they may not personally have the time, energy or expertise to beat the market, they can still turn to well-heeled professional managers to do the forecasting for them.”
“Your [plan] offers you and your advisor a shared reference point for every investment decision to be made at every turn: what and when to buy, sell, hold or redistribute – and perhaps most importantly, why.”
“The understandable craving to maintain control over your personal and financial well-being may leave you scanning the popular media’s headlines, searching for tidbits on how to protect yourself from the unfolding uncertainty.”
“During my years as an adviser, most of my clients have come to me weighed down by the volume and complexity of their overly packed portfolios. They desperately want to lighten the load, but they’re unsure what should be preserved and what can be safely jettisoned.”
“First we’d like to challenge the word ‘correction.’ We prefer to think of price volatility as simply part of doing business in the market to begin with.”
“When you go to buy a new car, you already know that a Ford dealer is unlikely to recommend a Toyota, even if it’s the better vehicle for you. It’s widely understood that this is the salesperson’s role, so you consider the advice accordingly.”
“There are plenty of numbers out there you can eyeball, and against which it’s relatively easy to compare your own assets without further ado. But just because a comparison is easy to make, doesn’t make it meaningful.”
Many thanks for reading our 2015 “STOP Doing” List blogs. There’s one thing we hope you KEEP doing in 2016. We hope you will keep visiting our blog … and let us know if we can answer any questions you may have.