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Confession time: My hobby is investing

I have come to realise that DIY investing is my hobby and not just a clinical exercise in financial self-preservation. That’s been the case for a while, but it’s something I’ve only recently thought out loud.

I think the same is true for many other investors who direct their own affairs – not because they must, but because they gain a sense of deep satisfaction from doing so.

I don’t deride hobbies as frivolous. I believe they play an important role in the lives of many people: As a creative outlet, as an anti-stress mechanism, and as an arena of personal control.

Bringing unbridled enthusiasm to bear upon an aspect of life can be highly rewarding, of course. But in the investing stakes there are clear dangers if passion is unleashed and unchecked like a mad dog that loves chasing traffic.

My name is The Accumulator and I am a DIY investor

DIY investing didn’t start out as my hobby. It began as a means of financial rehab. But over time, investing has dug its hooks in and come to fill all the niches formerly occupied by more conventional pursuits.

It’s taken me a long time to recognise that I was up to my neck in it because I was enjoying it – probably because well-adjusted human beings aren’t meant to enjoy investing.

Oh well, you have to recognise the signs sooner or later.

DIY investing is a great hobby

How to spot that investing is your hobby

Can you tick off these telltale signs of passionitis?

It’s a form of time travel

Admittedly one-way time travel, but all the same it makes the hours disappear – whether you’re catching up on reading or tending to your portfolio like it’s a prize flower bed.

There’s a sense of progress

Investing enables you to embark on a grand narrative. “After X years I’ll be able to pay off my mortgage. X years after that I’ll be financially independent.” A plan begins to unfold in the same way it does for a man with a loft, a Hornby catalogue, and visions of the golden age of steam.

It’s an outlet for personal achievement and creativity

Regardless of the frustrations of the workplace, you can continually build your skills and test your mettle in your chosen domain. Taking on challenges at your own pace and, as the milestones pass, traversing the ground ever faster on a magic carpet of soaring confidence.

There’s something to show for it

You can collect mugs, medals, or asset classes. Either way the objective is to expand the borders of you, and to build something tangible where you are king of all you survey.

You can master the rules

Any hobby is to life as a boating lake is to the wild ocean; a placid subset of challenges that can be understood, quantified and seemingly controlled in a way that the chaotic complexity of the wider world defies. Of course, the capital markets are as good an analogy for the turbulence of life as you can hope to get, but we passive investors respond by seeking surefire strategies and rules of thumb that enable us to cope.

There are others like me

Even a vintage lawnmower restoration enthusiast will eventually leave the shed to seek out like minds. And when you meet, you have an instant bond. You can talk for hours about the intricacies of your field. You’re an expert holding your own with other experts. There’s no awkward groping for conversation beyond the weather. You’ve found your people. Friends, rivals, mentors, pupils, heroes, villains1 – the full cast is out there – whether they be on Monevator, The Motley Fool, or The Bogleheads.

It doesn’t feel like work

This is something you do just for you. It’s your time, your space, and no one else gets to call the shots. You take the responsibility, and whatever you achieve you’ll take 100% of the credit.

But if DIY investing is your hobby, what implications does all that personal fulfillment have for your long-term financial well-being?

In the red

On the negative side of the balance sheet, The Dalbar Study reveals that the average equity investor2 has managed to underperform the market by 4.32% per year, for the last 20 years, thanks to an incorrigible need to chase performance.

The best advice for most investors is to draw up a passive investment strategy and do very little except buy, hold, and rebalance.

Of course, the hobbyist who loves to invest is going to want to put all that knowledge to good use. Perhaps reveling in the glory of beating the market or collecting funds like stamps to create a portfolio more complicated than a matchstick palace.

You could always write a blog instead! Or develop other mind games that keep you locked in the proverbial shed rather than throwing yourself off the nearest cliff like some crazy pioneer of early flight.

Enthusiastic amateurs love to fantasise about how they’d measure up against the big boys. But there’s a reason why Gentlemen vs Players fixtures no longer exist. There’s no sport to be had in amateurs being trounced by professionals.

There’s certainly money to be made in the markets. But a retail investor, no matter how clued up, stands about as much chance against the stock market big guns as a Victorian aristo relying on his huge beard and stripy blazer to face down the Australian pace attack.

The simplest way to avoid being someone else’s chump is to avoid playing the game. Accept your amateur status by taking the ‘that’ll do nicely’ market return of a diversified portfolio of index trackers.

In the black

On the plus side, DIY investors aren’t going to feel the sickening dread that most people feel every time they think of the retirement they haven’t planned for and the years that have ticked by.

We know what to do, what it takes, and we feel like our destiny is in our own hands. Having built up a modicum of investing nous, we’re not going to be taken in by the syrupy promises of charlatans.

Well, not common or garden charlatans anyway. It’ll take a really sophisticated swindler to get us; probably one with his own hedge fund and infallible risk management algorithm.

If our life-situation changes, we’ve got a bank of assets built up to cushion the blow, and we have the knowledge to lifestyle our portfolio as time goes by. We shouldn’t get to age 65 with a pension fund fit for a 20-something who ticked the wrong box 40 years ago.

Best of all, we’re not putting our money in pewter figurines, novelty chess sets, or any other money pit masquerading as a way to stand out from the crowd. Our cash goes towards building our wealth, not destroying it.

Assuming we don’t cock-up royally along the way or disappear in a flock of black swans.

Take it steady,

The Accumulator

  1. I’ll leave out lovers but I’m pretty sure those Star Trek conventions get pretty steamy after dark. []
  2. The Dalbar Study tracks US investors vs the S&P 500 []

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{ 15 comments… add one }
  • 1 westy22 July 24, 2012, 11:41 am

    I’m with you 100%. I realised that investing was my hobby, pastime and pleasure several years ago when I recognised that I enjoyed every trading day whether the markets were soaring or tanking. Doesn’t matter to me what the markets are doing so long as something is happening and my portfolio is moving in one direction or another! My main problem is the boring weekends and Bank Holidays 🙁

  • 2 Rob July 24, 2012, 1:53 pm

    I figure I’d make a better return over the long term by investing passively, but I also figure I’ll save more money by investing actively, solely because it is enjoyable. You want to grow the fund and you enjoy growing the fund.

  • 3 Julie at Nutmeg July 24, 2012, 3:57 pm

    It’s always great to discover something you’re passionate about, isn’t it? I’m glad you’ve discovered that your investing hobby is your passion.

  • 4 ermine July 24, 2012, 4:14 pm

    @Rob brilliantly put – indeed I think TA will get a win here even if he were to stray from the path a little. The interest will couple more of his energy into saving for investing, which is a darn sight better than saving for birdwatching or building train sets. Nothing wrong with either of the latter, but they don’t build capital 😉

    A great post TA – indeed I learned much about hobbies as well as your goals in this post – best of luck both with the goal and for a damn good ride on the way to it!

  • 5 George July 24, 2012, 4:16 pm

    Two things to consider:
    1) Savings rate is far more important than investment performance.
    2) Dalbar study only tracks fund inflows/outflows. It does not track investors purchasing/selling individual stocks.

  • 6 John H, Kidsgrove July 24, 2012, 7:12 pm

    Investing has been a hobby for the past 20 years, all the share price movements, dividends to monitor, favourite sites to check out every day, isa to be invested, sipp to manage….beginning to think I must be a little autistic to be so intensely focussed on these things on a daily basis.

    Where do hobbies end and compulsive, neurotic behaviour kick in?

  • 7 Simon H July 24, 2012, 9:07 pm

    It’s certainly interesting to read this: speaking as someone very, very new to the game and currently taking quite the mauling as markets tumble, it’s difficult to know how anyone could enjoy it!

    But I certainly see your point of view, and remain confident that when things like pound-cost averaging, dividends and just sheer patience take an effect, it could be rather satisfying to see it all come together.

    Well, fingers crossed!

  • 8 SemiPassive July 25, 2012, 10:32 am

    Simon, if you are new to investing and drip feeding in monthly (rather than having just invested a huge lump sum) then you want the markets to tumble. It becomes harder psychologically as your pot grows and your value at risk increases. Which is where asset allocation becomes important.

    As to investing as a hobby, I have SIPP and ISAs now split exclusively between index tracker funds and cash – no endless pondering about individual companies or switching to the latest hot managed funds -so reinvesting the % held as cash is my only option to tinker with at present. But I still have a slightly unhealthy interest in following the markets despite this passive strategy.
    The biggest bonus of going passive is no longer caring about how any individual company is doing when I flick through market news.

  • 9 Paul S July 25, 2012, 10:34 am

    Nice fun post TA.

    Never quite got the hang of this rebalancing business. Selling your star assets and buying more of your dogs seems an odd strategy to me.

    Each to hid own I guess.

    Cheers,

  • 10 gadgetmind July 25, 2012, 1:26 pm

    @JohnK – “Where do hobbies end and compulsive, neurotic behaviour kick in?”

    Dunno. My wife reckons it’s a bloke thing, and that instead of hobbies we have a series of unfortunate, and often expensive, obsessions.

  • 11 Matthew July 25, 2012, 4:51 pm

    Swinging? Chuckle.

    Sorry

  • 12 Alex July 25, 2012, 9:34 pm

    The Accumulator, never mind – there must be a website for people like you…

  • 13 The Accumulator July 26, 2012, 10:55 am

    Ha ha, nice one, Alex. I’ll let you know when I find it.

    Thanks all for your interesting comments.

    @ Simon – Just like SemiPassive, I take comfort knowing that the downswings are storing up the potential energy of future growth that will be unleashed when the pendulum swings the other way.

    @ Ermine – I don’t think an interest in active investing would give my savings rate a boost. Savings rate is 60% of net income and I think any extra juice would have to come from a desire to hit the target quicker by working harder or squeezing spending harder. Mostly those factors flow from my values i.e. “I’ll work this hard and no more” or “I need this standard of living and no less.” So I think future saving rate increases, if possible, will come from a change in my expectations of the good life.

  • 14 david stuart July 27, 2012, 3:00 pm

    great for us–your hobby is investing accumulator

    2012 has been the year of fixed charges–platform/quarterly ect which needed to be delt with

  • 15 Simon H July 28, 2012, 12:49 pm

    Thanks, SP and TA. Your words are greatly reassuring, as they resonate with what I’ve learned so far and with how I’m applying that learning.

    I also echo David Stuart’s words: all of us out here in readerland are benefiting from the author’s enthusiasm for his hobby, for which we are grateful.

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