If Investing Is Boring, You’re Probably Doing It Right
Speculation dates back to time immemorial, but it’s gone mainstream over the last year or two.
Whether as a sincere attempt at building wealth, an antidote to boredom and isolation, or a devil-may-care gamble for fabulous riches, it’s never been more normal to throw imprudent amounts of money into even more imprudent assets.
That can and does work for a lucky few during a limited period. For that matter, some folks also win big at roulette or flip heads twelve times in a row.
But over time, this…exciting…approach is unlikely to lead anywhere you want to be.
For starters, it’s not news that day traders aren’t profitable on average. That’s been thoroughly and repeatedly documented.
More interestingly, one major brokerage allegedly found that its best-performing accounts (again, on average) were inactive ones. The original study, if it exists, doesn’t seem to be available. But any number of academic papers have compared various trading frequency with low-touch or hands-off portfolios, and found essentially the same thing:
If thinking about your investing approach puts you to sleep, then it’s probably a good one.
For some, that’s dollar cost-averaging into some carefully chosen blue-chips. For others, it’s rebalancing a few ETFs every quarter or year. And for still others, it’s prioritizing continued dividend growth from stolid firms that just chug along.
A better way to get your financial thrills
The idea that you’re a couple clicks away from a life-changing trade is powerful. Heaven only knows how many scammers use that idea to justify bogus “courses” to greedy (or merely desperate) customers.
But for everyone on the podium enjoying the thrill of victory, there’s a whole field of also-rans suffering the agony of defeat.
The desire to do things with massive upside isn’t a bad trait. But the key is to wrangle it into submission and combine it with some hard work.