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AS I THINK BACK over the past three decades, I have one overriding investment regret.
No, it has nothing to do with the investments I bought. For much of the past 30 years, I’ve owned a globally diversified portfolio, with 100% in stocks when I was younger and closer to 70% now that I’m in my mid-50s. Initially, I owned actively managed funds and a few individual stocks, but I substituted index funds as they became available, so my stock performance has been what you would expect—very similar to the broad market.
To be sure, I could have done better if, say, I hadn’t allocated so much to foreign stocks. But that’s the nature of a diversified portfolio. There will always be laggards, but we only know their identity with hindsight.
If my big regret isn’t the investments I bought, what is it? More than anything, I wish I hadn’t spent so much time watching the markets. Admittedly, this was partly professional necessity. I was occasionally called upon to write about the markets, so I needed to know what was going on. Still, I could have spent a lot less time looking at the daily ups and downs, and yet I didn’t. Why not? I suspect there are three reasons.
First, like a whiny child that throws the occasional tantrum, the stock market demands our attention. All the turmoil is hard to ignore—and it’s becoming harder. Today, with a quick glance at our phones or our computers, we can find out what’s happening to stocks and where things stand with our portfolio. This is not helpful: We receive far too much short-term feedback on our long-term investments, and with that comes the risk that we will act hastily.
Second, watching the markets can be entertaining, but much of the time it’s mindless entertainment. Indeed, I follow the ups and downs with the same curiosity that I follow the results of the Baltimore Orioles, Brooklyn Nets, Plymouth Argyle and Washington Redskins. It’s been years since I’ve visited a stadium to see any of these teams play or even watched an entire game on TV, and yet I feel a tad happier when they win and a little sadder when they don’t.
(For those who don’t immediately recognize the name Plymouth Argyle, it’s a minor English soccer team to which I pledged undying allegiance when I was 10 years old—and which recently brought modest joy to my 54-year-old heart by gaining promotion from League Two to League One.)
Third, and perhaps most important, watching offers the illusion of control. If the stock market plunges, I feel it’s important that I know right away—even though my awareness won’t stem the market’s losses and, indeed, I won’t do much with the information. These days, I mostly content myself with rebalancing and occasionally buying a new index fund. If the market rose or fell 10% from here, I’d rebalance yet again, but that would probably be it.
I don’t just follow market and sports results. Every day, I spend hours checking email, Twitter, Facebook, LinkedIn, my website’s traffic, my book sales, engagement with HumbleDollar’s newsletter and more.
I love the ease of communication offered by email, the interesting articles I discover through Twitter, and the news about friends and family on Facebook. Instead, what bothers me is the endless stream of numbers that grabs my attention today, but which is forgotten tomorrow, when there’s another round of meaningless numbers to ponder. It’s information without insight, and yet it gobbles up time—a loss I feel more acutely as I age. The upshot: I’m trying to train myself to look less, but it’s a struggle.
Did you know the English soccer season starts in a few weeks?
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Jonathan,
“These days, I mostly content myself with rebalancing and occasionally buying a new index fund. If the market rose or fell 10% from here, I’d rebalance yet again, but that would probably be it.”
Why would you buy a new index fund? I doubt you’re changing your allocation such that you need new funds, so curious as to your reason for buying a new fund rather than investing new money in your current ones.
I’ll share one possible reason I’ve thought about, but I’ll also admit something tells me I’m overthinking. I have a total market index fund with big capital gains. Rather than put new money or proceeds from selling something into it, if I instead go with a different fund, then when I sell from the portfolio some day, I won’t be dealing with those pre-existing capital gains. Instead, I could put that $ in a different index fund and not deal with those gains when I sell, the only downside being that I may have a few more funds than necessary. I realize I could sell from the current total market fund identifying specific lots and accomplish the same thing, but this still nags at me…
What’s your reason, and where’s the error in mine that I’m sure is in there somewhere…?
Btw, I enjoy this “Second Look” section.
Thanks, Michael