I spend so little time on my investments that it feels wrong. How can I expect to succeed without any effort?
You get back what you put in, right?
Wrong.
Investing is one of the most counter-intuitive of activities going, because we can only meaningfully judge the results over several decades, not the hours or days our human brains are wired for.
Just how counter-intuitive is it? In investing:
- You don’t succeed by trying harder [1].
- You don’t get what you pay for [2].
- Doing nothing is generally better than doing something.
- The herd usually gets fleeced as they stampede from gold to Russia to pig trotters in search of the jackpot.
As legendary investing strategist Charles D Ellis [3] said:
The saddest chapters in the long history of investing are tales about investors who suffered serious losses they brought on themselves by trying too hard or by succumbing to greed.
Don’t be a postscript to the next sad chapter.
Ignorance is bliss
Because I’m into investing, friends will often ask me what the FTSE 100 is doing or whether yak futures are hot or not.
Embarrassingly, I don’t know.
I just don’t worry about it, because knowing how many points the FTSE moved last week doesn’t help me achieve my goals [4].
If anything knowing that sort of stuff is counter-productive. It’s akin to being afraid to go out at night because you’ve watched too many episodes of Crimewatch.
Instead, my passive investing [5] operation works like this:
[6]
Here’s how it fits together:
- The direct debit automatically [7] deducts money from my account.
- My online broker [8] silently funnels that cash into the funds I’ve preset as regular investments.
- The funds reinvest the dividends [9].
- My asset allocation [10] already contains all the mutually supporting investments I need to grow my nest egg and hopefully weather any storms that come along.
It all ticks along famously without bothering me.
The passive investing revolution will not be televised
It takes me just 30 minutes a month to double-check that everything has gone according to plan between bank and broker. Nothing is ever amiss, but I’m a paranoid soul.
I also tune in every now and then to update my portfolio tracker. And I rebalance [11] my holdings annually.
Rebalancing and reassessing my contributions once a year takes a few hours in total.
The rest of the time, I’m really not needed. It’s like a clockwork machine that just needs a bit of oil and a service now and then.
Sounds too easy? Well, we already know that passive investors will beat [12] active investors on average.
If you think that you can pay someone to help you top the investment hi-score tables – and for some reason you think you need to top the tables to succeed (you don’t) – then there are plenty of people who are willing to charge you a massive fee [13] for believing in fairy tales.
A crash course
The effort you need to put into investing is front-loaded. It’s worth understanding how the basics work at the start, so you don’t get ripped off or self-sabotage later.
Think of it like the time you put into buying a house. Doing some legwork is the best investment you can make in yourself because it’s incredibly important to make the right choice. Your future happiness depends upon it.
Here are some pointers.
- For the quickest summary of the basics, read William Bernstein’s If You Can [14]
. It’s 40 pages short and it is free on Kindle.
- For a fuller but amazingly easy to understand picture of what you need to do, read John Bogle’s Common Sense on Mutual Funds [15]
.
You’ll now understand why passive investing is the best way for you to go.
To turn that underlying philosophy into a concrete plan of action then UK investors just need to pick one book from the following:
- Investing Demystified [16]
by Lars Kroijer.
- Or Smarter Investing [17]
by Tim Hale.
Finally, if there’s anything you’re not sure about or want more practical help with, then not even modesty can prevent me from admitting that there’s no better place to go in the UK than our own passive investing HQ [18].
Get rich slowly
That’s it. Read two books – one easy, the second more comprehensive – then reinforce your understanding with our series of key passive investing posts [18].
You’ll be better informed than the vast majority of investors out there. You should easily know enough to manage your own investments [19] with minimal impact on your time1 [20].
There’s always more to learn, of course, especially for investing nerds like yours truly.
But if you haven’t got the time or the interest then at least you can move on in the knowledge that once you’re set up, the hard work is already done.
Whatever you do, just don’t end up writing a blog about it.
Take it steady,
The Accumulator
- Note you may need professional assistance if you’re trying to do something fancy, to do with taxes for example. If you need financial advice, look for a flat fee adviser with a good reputation who charges by the hour. [↩ [25]]