Why Do We Make This So Hard?

This is a question I have pondered for more than 25 years of investing. While I don’t believe I will ever know the exact answer to this question, there are some things that seem obvious to me. The first is greed. Most of us would never admit to being greedy, but our actions towards investments many times say more than our words. Regardless of whether you hire an advisor or do it yourself the base motivation is the same. This one driving emotion will trump any logical explanation concerning investing. Greed will creep into your investment portfolio at every profit. There is always the potential for more and in reality greed in and of itself creates ‘bubbles’ in the market. The old adage of – “it’s different this time” continues to introduce itself into our investment vocabulary. It is important to learn what turns your greed factor higher and avoid it. Put into place disciplines to keep your outlook in check and keep your money safe from the disease.

In addition we make it hard by thinking there has to be a faster way of getting there (more money). The reality is time versus timing the markets have always proven to be successful. There are numerous examples of this fact and yet we continue to try and beat the odds. Simple investment education would go a long way in avoiding this getting it faster syndrome. This is actually the cousin to greed. We fail to educate ourselves about even the most basics of investment acumen. As I wrote in a previous post, if all you did was take the major indexes and develop a simple discipline to managing your money you would be successful over time. John Bogle has stated for years the simplicity of long term index investing. Warren Buffet has shown the advantages of owning quality companies producing quality products and services over the longer term are the key to financial success. The challenge is we procrastinate the starting point and therefore we are now trying to make up for lost time and that in and of itself introduces higher risk into the equation.

Speaking of risk, understanding risk management is imperative in conjunction with managing your money. I refer to this as a disciplined investment strategy. It has taken me years to learn there is no right way or wrong way to invest money. But, it is essential you have a discipline strategy to managing your money, monitor your portfolio and adapt to the markets to achieve your goals over time. Do this and you will find investing a simple process. From my view it will rid you of unnecessary headaches, not to mention lost money.

Last, the greatest asset is self understanding which lends to being a better investor overall. Learning what you can and cannot tolerate relating to risk is vital to the investment process. In other words, actions that increase our emotions and lead to irrational or reactive decisions create the most harm. Therefore, learning our own investment psychology goes a long way in achieving investment success and our financial goals.

Making it hard is not necessary. In fact, keeping it so simple that you can do it, is imperative to success.