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BEFORE WE GET into it, a brief word. We lost Jonathan last year, and those of us who followed his work felt it more than we perhaps expected. He had a saying that I always liked – that there are really only twenty stories in personal finance, and the financial industry spends most of its time telling them on repeat in slightly different hats. He was right, of course. He usually was.
It struck me that a fitting tribute might be to take his core principles and do something with them, not quote him at length, but wrestle with the ideas in our own words, from our own lives. I’ve chosen “Resist the Urge to Act,” and had a go below. If the idea appeals to any readers posting on the forum, I’d love to see others pick a principle, whichever one speaks to you, and write about it in your own voice. No need to be an economist. Just be honest. I suspect Jonathan would have approved of that approach more than most.
There’s a strange truth lurking at the heart of personal finance that nobody tells you about, possibly because it would put a large number of people out of work. The more urgently you feel you ought to do something with your investments, the more damage you will probably do by doing it. I find this deeply satisfying, not because I’m wise, far from it, but because it seems my instinct to do very little was correct all along. Vindication, when it arrives, should be savored.
Jonathan Clements spent decades writing about money for the Wall Street Journal before founding HumbleDollar, which if you’re reading this you already know, and if you don’t, welcome, you’ve somehow stumbled into excellent company by accident. One of his core messages, boiled down to its purest form, was this: The secret to successful investing is to be comprehensively, almost aggressively boring. He had a list of principles, and one of them was deceptively simple: Resist the Urge to Act. I have a suspicion he knew it was one of the hardest ones, which is perhaps why he saved it for near the end of his various lists. Telling people to do nothing runs headlong into every instinct the modern world has carefully cultivated in them.
The financial news industry has a business model, and it is not, I would suggest, your long-term wealth they’re hoping to help. Their holy grail is your attention span, and attention without action doesn’t keep the lights on. So urgency is manufactured. Alarm is engineered. The moment a headline about Federal Reserve policy or market volatility lands on your phone screen, the correct and sophisticated response, according to Jonathan, is to put the phone face-down and go and make a cup of tea. This is not what the headline wants you to do. The headline wants you to feel that failure to react immediately constitutes negligence. It doesn’t. The information has already been digested, debated, and priced in by people who got it considerably earlier than you did. Acting on it now isn’t smart. It’s like arriving late to a party that ended an hour ago and wondering why nobody’s offering you a stiff drink.
Jonathan was a firm believer in market efficiency, the rather humbling idea that you, me, and most professional fund managers with their impressive offices and Bloomberg terminals, cannot reliably outthink the combined judgment of millions of other investors. Once you genuinely accept this, something might shift for you. You’ll probably stop checking your portfolio three times before lunch. Which matters more than it might sound, because there’s a fairly direct relationship between how often you look at your balance and how likely you are to do something regrettable with it. He had a line I’ve shamelessly adopted as my own: Your portfolio is like a bar of soap, and the more you handle it, the smaller it gets. My wife Suzie heard me say this recently and pointed out that I’ve never shown this level of restraint with actual soap. She’s not wrong. But then again, I liberate hotel soap.
The other temptation Jonathan warned against was treating the market as a hobby. There’s a certain thrill, I understand, in hunting for the next great stock, the overheard tip, the sector everyone’s talking about. The feeling that you’ve spotted something the rest of us turkeys have missed is a powerful one. He was fairly blunt on this point. If you want that kind of excitement, go to the cinema. Go to a casino. These are perfectly respectable venues for the willing suspension of rational judgment. Your brokerage account is not. The urge to act, dressed up as diligence and research, is still the urge to act.
The actual solution is somewhat anticlimactic. Broad index funds, bought automatically and regularly, regardless of what the television talking heads are shouting about. When the market drops and the headlines turn an alarming shade of red, the correct response, the disciplined, intelligent, sophisticated response, is to turn the television off, close the laptop, and take yourself for a walk. Jonathan was clear on this point: Doing nothing, at the right moment, is one of the harder things an investor can do. It only looks like laziness from the outside. From the inside, when every instinct is screaming at you to move, to switch, to sell, to “do something,” holding still takes genuine effort.
I have found, in my own modest experience, that retirement makes this philosophy considerably easier to live by. Urgency has a way of evaporating when you no longer have somewhere to be. The news cycle hums along without me. The market does whatever it decides to do. And I go for my walk. By strange coincidence, the halfway point often coincides with a bar serving decent Guinness. I consider this a stroke of luck.
It seems I was a follower of Jonathan’s advice for many years before I stumbled upon his name and writing. There’s something to be said for arriving at the right answer through a combination of temperament and mild indifference. I’m choosing to call it wisdom.
This piece was never meant to be anything more than one person’s attempt to retell one of Jonathan’s principles in his own words, a tribute of sorts, filtered through lived experience rather than expertise. The voice is mine, for better or worse. The wisdom, unambiguously, was his.
There are more principles still sitting there, waiting. Each of them deserves exactly this kind of treatment, personal, honest, and a little bit imperfect. So, who’s next? Because if there are no takers I’ll have a pretty big task ahead of me.
Mark Crothers is a retired small business owner from the UK with a keen interest in personal finance and simple living. Married to his high school sweetheart, with daughters and grandchildren, he knows the importance of building a secure financial future. With an aversion to social media, he prefers to spend his time on his main passions: reading, scratch cooking, racket sports, and hiking.
Great article, Mark! If you’d like to share your lessons based on JC’s principles, email me at bogdan@humbledollar.com
Mark, this was really good. We were out of town visiting my family last weekend, so just catching up. Jonathan taught me so much when I found HD. Keeping things simple was a big one. Chris
This is a great piece. Let me add a corollary. This explains why it is also a mistake to ever, yes ever, give wide or unfettered discretion to your broker to buy and sell on your behalf. You may subscribe to the “sit still” philosophy, but it is likely your broker without constraints will have already taken lots of action in unsettled times before you know it to “protect” you. Whether or not he or she succeeds, your own commitment to sit still was worthless.
My wife Suzie manages her own investment portfolio and, unlike me, uses a financial advisor. One rather useful feature of this arrangement is that she receives a phone notification whenever a trade is made in her portfolio. If nothing else, it gives near real-time visibility into how frequently transactions are occurring.
I seem to recall that Jonathan also said that if the market dips a lot, say 20%, that is the time to buy. I rebalance quarterly (or check to see if I should). The one time I chose to rebalance early was when the market tanked in the early days of COVID. I got lucky and bought bought more Vanguard Total Stock Fund on the second lowest day of that downturn. Your mileage may vary. Jonathan probably went heavy on stocks then rather than just rebalancing.
Brian. I’ve a similar rule, although I rebalance after a 15% drop rather than 20%.
The bar of soap quote is attributed to Benjamin Graham, according to Copilot.
Whatever its origins, it’s still a wonderfully visual metaphor.
Sorry to hear the news. The principle that initially brought me here was called Follow The Fed. Grateful for the knowledge he offered us.
I have violated many of these principles at one time or another, but usually not with a lot of money or not for very long.
However I think the role of the usually cited index funds can be called into serious question today. Starting with today’s SP500’s inflated valuations and concentrations in a small number of stocks is certainly a recipe for a decade of low returns. We saw this from 2000 to 2013.
There is a good case for equal weight funds in Large Cap but active management in small caps and international stocks.
no one does better than an index without a high active share but most investors have no idea what that is.
When I talk to folks who have provided near SP500 level returns with less volatility, I am always impressed by their understanding and insight into valuations and prices paid.
Wouldn’t it be a grand idea to tell a story of how you violated one of the principles? There’s definitely a few hundred words waiting to be told; I’d be interested in hearing the tale.
Greats article, more people should be aware, quickness and stocks really do not combine. Think of this, if you are going to invest for 50 years and more, a day, a week or a month will make little difference. I cannot say when I learned this, but somehow Bogle, Buffett and Jonathan sure made it clear, no need to be in a hurry. Main point invest, be disciplined, and keep investing, and probably the more boring the better.
William, your comment brings the tortoise and the hare to mind. Slow and steady often wins the day.
Mark: I am certain Johnathan would be humble in his appreciation of your remarks. Personally, I think it is one of the most uplifting articles I have read recently.
The old saying, “Great Minds think alike,” came to mind as I read your comments regarding Johnathan’s penchant for simplicity. It reminded me of the teachings of Jack Bogle, the person most responsible for the creation of the Index Fund, and the industry giant, Vanguard Group..
One of Bogle’s most famous quotes, regarding the market and it’s flucuations was, “Don’t do something! Just stand there.”
As difficult as it is to do sometimes, knowing that I already own a piece of almost every company on earth, makes it easier to resist the desire to execute my master strategy to beat the market, or find the next “big thing.”
I own two ETFs. VTI and VXUS. They comprise 100% of my portfolio, consisting of Roth IRA’s, Traditional IRAs, and Taxable Brokerage Accounts. 80% in Vanguard’s Total US Stock Market and 20% in Vanguard’s Total International Stock Market. No matter the company, no matter where in the World, if it’s public, I own a piece of it.
Because of the structure of my retirement income streams, I am fortunate not to have to use my portfolio to produce retirement income. Social Security and annuity income streams provide that. My portfolio is there to grow, provide for later in life income options, and later in life catastrophic care dollars, should my wife need LTC, and finally, to leave a legacy to our children. And from time to time, perhaps a lifestyle opportunity, like travel, but that will be decreasing over the next five years.
It’s simple, tax-efficient, and low-maintenance. It also avoids AUM fees of 1% and higher by advisors, 92% of whom cannot consistently outperform the S&P 500.
I look forward to your next article.
Mike, your kind words genuinely mean a lot — thank you. And you’ve got me thinking… the Bogle/Clements wisdom you mentioned? There might just be the bones of a cracking little post in there. Worth dusting off and giving it some air, don’t you think?
It just might be. Go for it!
Well said, I took a slightly different route, and it is because i was swayed by Warren Buffett, of 85% S&P and 15% cash to ride me through the dark times. If I did this for the last 60 years, S&P at 85%, the difference would be about 1% to 2% better with S&P, because all my buying and selling of individual stocks, caused me to loose that 1% to 2%. At 80 years old, I am happy to have simplified my investing.
I have been reading Jonathan for decades and love his Humble Dollar website. His advice is similar to John Bogle’s command “Don’t just do something, stand there.”
Very humbling writing style and a great way to pay tribute to Late Mr. Clements.Well done.
Excellent article, Mark! Keep ’em coming! Thanks for sharing Jonathan’s do’s and dont’s list!
David, I read a comment of yours saying you struggle for article ideas. There are 19 suggestions waiting; maybe one could spark a post? You never know, once the creativity gets flowing, a full article could appear.
Insightful, enjoyable perspective. Thank you for sharing.
I understood that Mark’s loose quoting in this article of Jonathon ( “… there are really only twenty stories in personal finance..”) was not necessarily meant to refer to a specific list. Having been a follower of JC (the writer!) for ~ 3 decades (been following the other JC for > twice that long!), the point that JC was making didn’t require a list of what the “20” stories or principles were, about misaligned incentives in the financial services industry. Let the buyer beware!!
It’s an interesting challenge Mark makes here, and I thought briefly of the other (19? 25? 15? whatever! ) principles JC helped us all to understand so well. And the one that first came to my mind, because he spoke of it so often and so well, was the principle of hedonic adaptation, and why accumulating “more stuff” (including money, past a point) doesn’t make us much happier. Diminishing returns, what really DOES make us happier, and all of that.
If I was going to take up Mark’s challenge and discuss another of JC’s core principles at length, that’s the one I might pick…unless someone else does so first! Which one seems the most relevant to YOU…?
Thanks for the link Mark…I guess there was an actual list.
Glad to see that the one I referred to was actually on it! (#19.)
Maybe that’s the perfect one for you to create an article about?..or a short forum post?
I wasn’t able to include a live link to the principles in the article. Tech dinosaur problems. What I can give you is the URL below — it takes you to the Index Fund Advisors website, where Jonathan Clements’ 20 principles are listed with a short description of each. I’ve tested it myself, so if you copy and paste it into your browser it will work:
https://www.ifa.com/articles/20_dos_and_donts_for_investors_from_jonathan_clemen
I’d like a reference to the 20 principles mentioned earlier. Thanks
https://www.ifa.com/articles/20_dos_and_donts_for_investors_from_jonathan_clemen
I feel like I missed a memo. Are we doing articles again and not just Forum posts? Do we send them to Bogdan or Elaine or…?
I know Adam Grossman and Bogdan have been publishing articles all along, but I thought the rest of us did Forum posts.
Anyway, nice job, Mark, and like the others, I’d like to be steered toward the list of principles so I could see if inspiration strikes.
This is my third article in the last six weeks or so. Whenever I write something that feels like it has article potential, I email it to bogdan@humbledollar.com and leave the decision entirely to him. So far he’s accepted all three — although if I’m the only person sending him material, I have a pretty significant advantage lol. (Maybe you could try one of the principles)
Where are the 20 principles? Good article but left me hanging??
Here you go. https://www.ifa.com/articles/20_dos_and_donts_for_investors_from_jonathan_clemen
He was VERY correct about the same ol stories that exist… But as a former media relations professional in financial services, let me tell you this: it is the press, not the financial companies, that tell them over and over again with slightly different hats. Sadly, the press often does what is easy…
Yes, Wall Street keeps coming up with new silly things to sell us.
Spot on, Mark. Every morning when I log in to HD, I enjoy the tidbits of knowledge at the top of the page, and have considered expanding on some of them, by writing how it pertains to my own experience. I imagine it would be a bit like the conversations among Chrissy’s ‘book club’ friends, sans the bottles of wine.
In my extensive and entirely scientific research, a Guinness consistently outperforms black coffee as a creative lubricant. So kindly stop faffing around, assault the keyboard with purpose, and produce something worth reading. Do that, and a bottle of wine may find its way to your door via FedEx — assuming FedEx hasn’t lost it, which, frankly, is a coin flip if one of your previous yarns is to be believed 🍷
It’s because of Jonathan Clements, and this particular principle, that I did NOT install the TIAA app on my phone. It’s much easier to not look at your portfolio when it’s a little more difficult to do so!
I really enjoyed this article.
A personal story for a little post maybe?
No question, broad-based index funds, allocated between stocks and bonds based on age and risk tolerance, are key to long-term investment success. I would add only one nuance: the retirement years pose a slightly different challenge. It’s important to ensure your allocation aligns with your tolerance for equity drawdowns and sequence-of-returns risk, especially if entering retirement at times of high market value metrics, thereby limiting your need to sell shares to fund living expenses at inopportune times.
Dan. That comment deserves to be a full post. The question is a good one: what does it actually mean for someone approaching retirement now that cash and cash-like investments are yielding something real again — versus five years ago when stuffing money under the mattress was almost the rational move?
Clock’s ticking. Write it before I do. 💡
In a quote attributed to Charlie Munger, this principle was expressed as “don’t do something, just stand there” or words close to that. Good advice however it is phrased.
That was Jack Bogle.
The quote was “Don’t just do something; stand there” (swapping the word pairs of the familiar other saying). quoteinvestigator.com explores it.
Thanks. I went by recall and was a little off.
Link to the 20 Principles?
https://www.ifa.com/articles/20_dos_and_donts_for_investors_from_jonathan_clemen