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I’M NOT SOMEONE who pats himself on the back when he does something right. I’m also not someone who takes compliments well. But this time, I want to toot my own horn.
After four years, I can finally say I’ve accomplished a goal that I’ve worked toward for many years, but was unable to achieve. It wasn’t easy. It took a lot of discipline and composure.
To accomplish this feat, I tuned out cable business news. I avoided financial articles on topics like why you should sell bonds or overweight foreign stocks. More important, I ignored the financial markets’ daily performance.
What have I done the past four years that I’m so proud of? Absolutely nothing. It’s quite an accomplishment, don’t you agree? It’s not easy to sit on your hands, sticking with your long-term investment plan through good times and bad.
Okay, I did do something. I rebalanced my investment portfolio twice. But that’s all. I give some credit to my financial advisor, who helped me stay the course.
You might say, what’s the big deal? Here’s what: I can, at long last, say I’m behaving like a passive investor. Yes, I owned index funds before. But that doesn’t make you a passive investor if you’re still chasing performance. This year, for instance, how many index-fund investors have upended their long-term asset allocation plan by reducing their bond holdings?
To be a passive investor, you have to hold your investments over the long term. I know four years isn’t a long time. But for me, it’s quite an accomplishment. What is passive investing?
I don’t know anyone who can forecast how stocks and bonds will perform over the short-term. But I do know that it’s highly likely the financial markets will produce positive returns over long periods. That’s why it’s important to focus on long-term rather than short-term results. It’s what a true passive investor does.
I have an investment account that I fiddle with every day. I have another account B which has securities I have no interest in. I look at acc B only once a quarter and then only briefly. B has been the stellar performer in each of the past 4 years. Thank you for your reminder, Dennis!
Nicely done, Dennis. Your “action via inaction” approach brings to mind that time-tested advice once offered by the late great Jack Bogle:
“Don’t do something. Just stand there!”
Very well said. It’s a good reminder of why using an advisor can be a good idea for some. A balanced or target date fund might help us not tinker around the edges or try to time the market, but it may not be possible if one has a number of investment accounts including both qualified and taxable funds.
I believe you should be proud of all the great humble articles you’ve written. I tried to count how many, but it was overwhelming.
Olin,
Thank you for kind comments.