In these days of instantly accessible platforms via apps on our phone, we can check the value of our portfolio daily. Some people have admitted checking the values of their funds throughout the day, which is especially weird if they’re investing in funds which are only priced once a day – the value literally will not change except at close of each day.
But if you’re investing – as you should be – for multiple years, then why check the values each day? Why do that when it’s an irrelevantly short timescale? The answer is because it becomes a habit.
We wake up, we check email, Facebook, Instagram and Twitter, then we check the value of our portfolio. It’s just a thing that we do. Or is that just me?! I think not. Checking the values too frequently is a bad idea, so take the app off your phone. Just delete it.
This forces you to check less frequently. Maybe you have to fire up your laptop to check, which might be more of a hassle. It also means you’re less likely to do something stupid because the markets tanked the previous day. You have put in place a framework for nudging towards good – or at least better – behaviour.
Another framework you can build in is a reflection period before making any decisions regarding your investments. If you’re prone to jumping onto your platform to make some changes to your portfolio after reading or watching something with a negative outlook for markets, then decide that you will always wait at least 24 hours, and ideally at least 48 hours before making a judgement.
As a minimum, sleep on the decision and see how you feel in the morning. I’m of the view that you should rarely, if ever, change your investments – set them and forget them. Don’t make financial decisions after a bottle of wine. Only make fund switches on the weekend. These are the kinds of framework rules you can make for yourself. You’ve just gotta stick to them.
Don’t EVER get Comfortable
One of the biases mentioned above is confirmation bias, the tendency to seek out information that confirms our own fiercely-held points of view, rather than challenging them. Don’t let that happen to you. Instead make a point of actively challenging your own beliefs.
I think we need to cultivate humility when it comes to money. Money is a much bigger thing than we can ever imagine. Markets are fundamentally unknowable. You don’t have an angle that others incredibly just haven’t found yet.
Humility coupled with a drive to improve ourselves is a powerful thing, we just need to not get comfortable with where we are. The second we settle for our current level of understanding; something will come and test us.
One of the wisest things I’ve ever had said to me was from a pastor at my church when I was newly married. He was teaching that it takes work to stick at a marriage for 50 years or more and that temptation, in this context infidelity, is always present.
It can be easy to say ‘Well, I’ll never be tempted to infidelity’ just as it’s easy to say ‘I’ll never make a stupid investing decision’. His words to me were: ‘An unguarded strength is a double weakness’. In other words, wherever you think you are strong, and so don’t feel the need to shore up your defences, and hence by definition, those are the weak points, and that’s where trouble will strike.
Easily my favourite book of the last ten years is ‘Ego is the Enemy’ by Ryan Holiday. I’m committed to reading it every year for the rest of my life – it’s that good. It is filled with short chapters of times in history where the ego of key players led them to make sometimes catastrophic mistakes, and others where an ego held in check led to a good outcome. I highly recommend it.
Understand your own limitations and stay humble. Pursue greater knowledge on this extremely important subject. Don’t ever get comfortable, and commit to a lifetime of learning, rather than settling or getting comfortable, it’ll take a lifetime. Accept that, realise you’ll make mistakes on the way, and commit to learning from them.