When it comes to investing, most people who are successful use a simple approach to achieve results.
They’re boring investors.
Most investors are awful when it comes to researching the investments they make. And because they fail to research and plan, many investors unnecessarily lose money over time in the name of excitement and entertainment.
If you want success in investing, you too will need to be a boring investor. Here’s why.
What Does a Boring Investor Look Like?
For starters, a successful (boring) investor actually researches different investment strategies before moving ahead – and this is after they’ve studied their strategy’s fees and historical data.
In addition, successful investors also typically pick a single strategy and stick with it for the long haul – that is, they don’t flip and flop as the markets go up and down.
These investors will typically pay less in fees, choose wiser investments, and are more diversified…which makes them a lot more money over time.
Being a Successful Investor Requires Discipline
If you’re feeling like this blog post is boring so far, you’re absolutely right. I made it boring for a reason.
Because of this simple truth: To become successful in investing, your strategy must be absolutely boring.
Unfortunately, many investors (including financial planners) aren’t that great at being bored. So, they skip the boring stuff (research and planning) and wax poetic about the latest investment strategy they’ve just landed upon. Is it dividend investing? Bitcoin? Marijuana?
Why do people do this? Why do they jump from one investment strategy to another – never even bothering to see through (or even measure) the merit of their idea?
Because the alternative approach is hard work – and it’s very boring.
After all, exclaiming, “I believe in Jeff Bezos!” (the CEO of Amazon) and proceeding to purchase shares of AMZN at any price is a lot less boring than sifting through the financial statements of a company to measure their profitability.
If you’ve ever done research on investing (and no, reading Forbes articles on the latest and greatest investing ideas don’t count), you’ll quickly come to the conclusion that low-cost, buy-and-hold investing strategies trump every other investment idea. Moreover, diversification reduces risk.
But, reading such research takes time and focus – both of which are finite. And of course, too much research can become especially boring.
As with most things in life, discipline is required for success.
Looking to shed a few pounds? You’ll likely need some discipline in your diet.
Do you want to complete a marathon? You’ll likely need to stick with a training regimen.
Would you like to buy a house? You’re going to need to put some effort into researching and viewing real estate.
Boring Investors Don’t Make the News
All of the above explains why so much of today’s financial media is “fake news.” That’s because real financial advice is boring and repetitive – and that doesn’t make for good media content.
Consumers don’t want to hear the same boring advice over and over again. They want to hear something new and exciting. If they don’t, they’ll change the channel.
How long do you think Forbes or CNBC would stay in business if Monday’s headline on the value of low-cost, buy-and-hold investing was followed by Tuesday’s headline that low-cost, buy-and-hold investing outperforms? Not very long, unfortunately.
As a result, the only way these media outlets can continue to exist is if they scream about the latest (interesting and sexy) investing trends – like marijuana, bitcoin, gold, or dividend investing.
Let’s face it: real financial advice is very, very boring. But, it works.
Perhaps this is the real crux of the problem. Because financial entertainment is sometimes portrayed as news, it’s easy for people to get confused.
But, as we’ve outlined, financial entertainment is not the same thing as news. Is paying your utility bill on time fun and entertaining? Of course not. It’s super boring. But it saves late payment fees and prevents the water from being shut off.
Are you going to hear about that on the nightly news? Nope.
Financial Entertainment Doesn’t Make You a Successful Investor
So, here’s my advice: Make sure your financial plan and your financial entertainment lead separate lives.
If you insist on subjecting yourself to the financial mass media, know that you are consuming it for entertainment purposes only. Jim Cramer is very entertaining, but he is a terrible investor.
If you want to be successful, don’t follow the crowd or listen to blow-hard media investing gurus who are paid for clicks.
Make sure your investments are boring, and you’ll almost always end up ahead.