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Robin Powell: The financial media likes to make investing seem exciting. But, in fact, successful investing isn’t particularly exciting at all. Allan Roth is an adviser and investment writer based in Colorado.
Allan Roth: Well, I think there’s a couple of reasons. Number one: human nature wants excitement, doesn’t want boring. And we want to feel like we’re in
Robin Powell: What, then, does Allan make of investment magazines and newspaper money sections. The messages they put out are often very appealing and difficult to ignore.
Allan Roth: Yes, absolutely. And by the way, I really got my start writing for Money Magazine. I wrote an undercover column called The Mole, which was an inside look at my industry. But of course, no-one’s going to buy a magazine that says minimize expenses and emotions, maximise diversification and discipline, understand that we don’t know the future, rebalance, etc. I wouldn’t buy that magazine.
Robin Powell: Simply put, the financial media
Allan Roth: So my advice is to try to ignore all of that. Whenever you see a prediction, ask yourself: "Do they know something that the market doesn’t already know?" Everyone said: oh my gosh! Bond bubble. Interest rates were going up. The Fed’s going to increase rates. And guess what? The Fed increased rates (the overnight rate, in the US) and bond rates went down. Because that information was already priced into the market. The more you think you know what’s going to happen, the more likely you’re following the herd.
Robin Powell: Interestingly, Allan admits he does allow himself just a little entertainment as an investor. Alongside his index fund portfolio, he buys no more than two stocks a year.
Allan Roth: It exercises a piece of my brain that wants to have a little fun. Because the index funds are incredibly dull and boring. And I set rules on my gambling fund portfolio. So it’s okay to do that as long as you have rules.
Robin Powell: So, remember: investing isn’t supposed to be exciting. If it is, you probably aren’t doing it right.