What Matters & What Doesn’t In Investing

Every day the financial media pushes hyped-up stories on individual investors. Take a look at the example here:

STOCKS SOAR, CRUDE OIL GOES BANANAS: Here’s what you need to know

The game is to get your attention by coming up with ever more provocative things to say. More attention means more views which drives advertising revenue.

The truth is that 99% of what the financial media puts out is just noise that won’t do anything positive for your investments.

In fact, it will likely hurt your investments. All of the noise and hyperbole of the financial media creates the idea that we must take action… We must do something.

After all, stocks are falling (or rising) due to the terrible (fantastic) crisis (boom) in the [insert region or industry here]. You don’t want to get left out… Do you?

This is all nonsense.

A study of 78,000 individual investor accounts proved that stocks investors sold outperformed those they purchased. In short, individual investors sell at exactly the wrong time.

Not only are individual investors (and institutions, but that’s a whole different topic) selling at the wrong time, they are also incurring transaction costs with every trade.

The more you trade, the less successful you are likely to be in your investments. That’s why I advocate Do Nothing Investing.

The Big Casino

In large part, we have forgotten what investing is all about. It seems many people think of the stock market as some sort of exciting virtual Las Vegas where bets are placed on companies.

I see the appeal of this – it means you aren’t responsible for your losses and you are free to ‘celebrate’ on your wins.

The stock market is not a virtual casino – far from it. It is a place where you can buy fractional ownership of some of the best businesses in the world. Or, if you prefer, mediocre or poorly run businesses.

Great Businesses Reward Their Owners