When I was writing my 2012 book, Abnormal Returns: Winning Strategies from the Frontlines of the Investment Blogosphere I wanted to cull some lessons I have learned in my (now) ten years of blogging. One of the themes from the book, which was written with the average investor in mind, was to simply do less.
So when I see other (smart) bloggers emphasize these same themes I want to highlight them. There are two ways in which “doing less” can happen in our investing lives.
- Eliminate (or radically reduce) the amount of financial media you consume and;
- Make fewer decisions (and automate them if you can).
On those themes I wrote in my book:
- “The financial media sells noise because it is exciting. The fact is that the principles of personal finance and investing are kind of boring.” – Chapter 11
- “Successful investing requires time, time that for many is better spent in other pursuits. Arranging our financial lives to minimize the number of decisions we make can make for better outcomes.” – Chapter 12
These themes fly in the face of what you commonly hear in the financial media where the general idea is to do more, more, more. Kent Thune writing at the Big Picture clearly states why consuming less fiancial media is a win-win. He writes:
- Turn down the noise: The reward (and supposed shortcuts to it) are communicated through financial media. Again, it is self-awareness that can prevent us from becoming our own enemy but it also enables the recognition of our external adversaries, which are our sources of information. Ask a few reflective questions: Where do most of your investing ideas come from? Do you find your information or does it find you? Do your sources of information exist to sell advertising? Do they appear to thrive on inciting emotion or do they present information in a factual and unbiased manner? If it is raw data that you need to make informed investing decisions, then find sources of information that produce few emotion-provoking headlines and speculative opinions to attract page views and listeners.
If consuming less media makes sense, then actually doing less makes sense as well. Robert Seawright at Above the Market wants us to do more thinking up front in terms of investment philosophy and less on actual execution. He writes:
(M)aking fewer decisions can mean building an investment process that, in effect, makes the decisions for us. If we carefully and collaboratively build, monitor and continue to evaluate a process that gets us to the decision we need without having to make (potentially a lot of) active preliminary decisions at every step we can improve outcomes, often by a great deal.
So if you want to make better decisions, start by working out how you can make fewer of them.
The bottom line is that we are not as smart, or as unbiased, as we think. Outside influences, whether they be from the media, or next door can greatly affect our decision making. However if we take those decisions out of hands and automate them then we have both the luxury of time and the peace of mind we are not making questionable ad hoc decisions with our money.