For the last few years I’ve been making New Year’s resolutions. I don’t know why. They really don’t make sense. If you want to change something in your life, you don’t need an arbitrary date in the future to begin the transformation. You just begin the day you decide to change things. But in any case, I’ve been making them. And I’ve been quite successful. Last year, for instance, I had two New Year’s resolutions. First, I wasn’t going to bed with the television on. And, second, I wasn’t going to pour any sugary drinks down my gullet.
For the first couple of weeks of 2015 it was hard. My body was screaming for sugar. And I couldn’t fall asleep without the Housewives of Whatever nattering at the foot of my bed. But after a few weeks, my body and brain adjusted. They discovered that sugar and sensory deprivation weren’t so bad. Life was still good.
Fast forward to today and 2015’s resolutions are now habits. Whenever I’m thirsty, I reach for water. When I’m at a restaurant or a fast food joint, I’ll treat myself with a diet soda. And as for the television rocking me to sleep? Fuggedaboutit. The television in my room is now a decoration. I can’t remember the last time I turned it on.
So what will be this year’s resolutions? Or, better yet, what will become 2017’s habits?
For this year, I decided I want to be a better investor. And to up my game, I need to do two things. I need to conquer my financial news addiction, and I need to conquer my portfolio obsession.
News, whether financial or otherwise, is designed to do two things. First, it’s designed to scare the crap out of you. Remember Greece last year? For a few months the whole global economy hinged on whether the European Union would rescue the broke Greeks from their spendthrift ways. Really? The economy of Greece is about the size of Connecticut’s. And it’s the linchpin of the global economy?
The second thing the news is designed to do is flatter your tribal impulses. It takes two groups with friction between them and anoints one group the good guys and the other the bad guys. It then shows all the ways the bad guys screw the good guys. It rarely if ever shows how the good guys screw themselves or screw the bad guys. Your job is to decide which group you sympathize with and then patronize the news organizations that have anointed them the good guys. So if you loathe income inequality and sympathize with the 99 percent, you watch MSNBC and read the Huffington Post. If you think income inequality is a made-up crisis and sympathize with the 1 percent, you watch Fox Business and read the Wall Street Journal. It’s wonderful. Everyone gets to feast on as much confirmation bias as they want.
Now some questions. What value is there in subjecting yourself to a scare machine and a confirmation bias machine? Will it make you a more thoughtful person? Will it help you become a better spouse, worker, or voter? Will it help you overcome the innate behavioral flaws that compromise your ability to invest wisely? I don’t think so. I think the more you subject yourself to the news, the worse you’ll be. You won’t be more thoughtful; you’ll be more rash. You won’t be an informed voter; you’ll be a koolaid-drinking Demobot or Republiborg. You won’t be a great investor; you’ll be an easily-scared and easily-led fool who has a penchant for buying high, selling low, and destroying wealth.
So 2016 for me will be a total news blockade. No CNBC. No Yahoo Finance. No New York Times. No Rush Limbaugh. No Daily Show. No scare machines and no confirmation bias machines. I’ll take my chances with books (I’m currently reading The Black Swan), podcasts (Stacking Benjamins, Radical Personal Finance, The Art of Manliness, etc.), and bloggers (Abnormal Returns, The Reformed Broker, Nerd’s Eye View, etc.).
No Portfolio Obsession
In 2015, I checked how my index funds and ETFs were doing every trading day. It was ridiculous. Mrs. Groovy and I had an asset allocation we were comfortable with, and we were determined to stick to it. But every day I would look. Was the portfolio up $5,000 or was it down $5,000? If it were up, I happily cleaned the dishes after dinner and marvelled at my investing prowess. If it were down, I begrudgingly cleaned the dishes and fretted over my investing strategy. Why? Why was my mood predicated on something that didn’t matter? Why was I using the fickleness of the herd to gauge the merits of my investing strategy? Does Warren Buffet allow the daily gyrations of the stock market to affect his happiness? Does he question his game plan whenever the market dips?
Well, for 2016, I want to be like Warren. No daily obsession with my portfolio. I’ll only check the value of my portfolio once a month—when I update my net-worth tracker. That’s it. 2016 will thus have many more delightful dish-cleaning nights than 2015 did.
Investing is easy—think long-term, dollar cost average, and don’t get emotional about the market. But that guy in the mirror complicates things, especially if he’s a financial news junkie and checks the value of his portfolio every day. “We have met the enemy, and he is us.” So to protect myself from the guy in the mirror, I’m going to subdue two bad habits in 2016. No news. No portfolio obsession.
Will it work? Will subduing my financial news addiction and my portfolio obsession allow me to become a champion investor? Probably not. But remember, my goal is to become a better investor—not become the next Ray Dalio or Warren Buffet.
What bad investing habits do you have? Do you react to market swings? How do you get out of your own way? I’d like to hear your comments.