Be Boring, Make Money

In 2008, Paul Rudd introduced us to his character Kunu from the summer comedy, Forgetting Sarah Marshall. Throughout the film, Kunu, a carefree surf instructor, made us question some of life’s deeper truths like what you should really do when life hands you lemons or how ambiguous yet very much concrete one’s age can really be. But his best piece of advice came on the beach during one of his lessons:  “The less you do, the more you do.”

Now, that’s funny because it makes zero sense in almost every situation—almost. When it comes to investing, it actually holds true. People live in constant fear of missing out and as a result tend to do what everyone else (read: the market) is doing. Unfortunately, that process usually results in buying high and selling low, which makes it extremely difficult to accumulate wealth. So to break away from the pack follow these three guidelines:

Quit watching CNBC

It’s financial porn. Jim Cramer’s job is to get you all excited about the possibility of making big money, but you know it’s not the real deal. Actual investing is boring:  There are no flashy graphics, “buy, buy, buy” sound effects, or sweaty men yelling “booyah” to novice investors in Centerville, Ohio.

Actual investing is way less active. In his book The Behavior Gap, Carl Richards says, “Saving money, avoiding speculative investments, and repeating that process over and over may not be sexy, but it gets the job done.” People want to feel like they are doing something, so they watch CNBC and read Money magazine, adjusting their investment strategy based on the latest financial fad. Smart money sets an allocation, rebalances when necessary, but otherwise leaves it alone.

Quit thinking you’re Warren Buffett

In 2008, then Senator Barack Obama said to a group of kids, “Maybe you are the next Lil Wayne, but probably not, in which case you need to stay in school.” Well, I’m here to tell you that maybe you’re the next Warren Buffett, but probably not, in which case you need to stay in low-cost, index ETFs.

We can learn a lot from Mr. Buffett:  He is the consummate value investor, and he does not get distracted by the day-to-day movements of the stock market. You will not find a Bloomberg terminal in his office or a TV with CNBC muted in the lobby of his building. These are great qualities for an investor to have, but it would be a mistake to believe that you can match the performance of Berkshire Hathaway with your personal wealth simply because you agree with his philosophy.

Quit comparing yourself to your day trading co-worker

I know “Jim” supposedly doubled his money last year on that Netflix position, and now he’s thinking about buying put options against the yuan. But don’t listen to Jim. Jim has no idea what he’s doing, and he definitely isn’t telling you about all the times he lost money.

Do you know what the best performing stock has been over the past 30 years? It’s not Apple, Google, or Intel. It’s a company that produces flavor additives for animal feed called Balchem Corp. based out of Wawayanda, New York, and its stock is up over 100,000% since 1985. But guess what? You, Jim, and Warren Buffett all missed it because it would have been nearly impossible to predict. So quit trying; you’re just losing money and wasting time.

 

We live in the generation of now. We want to be active and engaged to see immediate results. But that’s not the way investing works. It’s slow and boring, but it’s also incredibly effective over the long run.

Josh Norris is an Investment Advisory Representative of LeFleur Financial. Josh can be reached at josh@LeFleurFinancial.com.