If you want to invest sensibly, here are ten things you SHOULDN’T be doing:
- Buying and selling investments every month, day, week or hour
- Researching all the thousands of publicly traded securities on an ongoing basis
- Changing your mind. Constantly
- Monitoring news and opinion, and adjusting your portfolio accordingly
- Chasing so-called ‘hot’ fund managers, investment themes and strategies
- Basing decisions on your ‘gut feel’ or the direction the wind is blowing
- Taking tips from pundits, family members, or Twitter
- Confusing market commentary with financial advice
- Being biased towards past experience, or the last thing you heard or read
- Tossing a coin or throwing a dice to make investment decisions
There IS another way!
We know there is no such thing as persistence of performance. We know it’s impossible to time the market. And we know that investments usually go up in the long term.
That’s why we do evidence-based investing. That is, investing based on science.
Here’s a quick checklist to see whether you agree with us:
- Is the future unknowable? YES/NO
- Is it impossible for anyone to reliably guess what’s going to happen for extended periods of time? YES/NO
- Is instinct and intuition too inconsistent to rely on for your financial future? YES/NO
If your answer is YES to all three questions, you can cross the above ten daft and pointless activities off your ‘to do’ list, and relax on your sun lounger.
If you (like us) like evidence. Here’s some.
Our friends at Dimensional have recently updated their US study of the mutual fund landscape. Their findings support our view:
It shows 86% of equity funds and 87% of fixed income funds fail over 15 years – that is funds that have been set up, performed poorly, and gone away again.
In a nutshell, the ‘active’ fund managers aren’t doing much – except charging you too much!
We hope this reassures you that it’s OK to put your feet up.
P.S. For a reminder of why active fund management is not the answer, you might like to read (or re-read) our recent articles: