When it comes to investing, most who are successful use a simple formula to achieve results. For starters, successful investors actually research different investment strategies before moving ahead—and this is after they study their strategy’s fees and historical data. Lastly, successful investors 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.
Unfortunately, far too many investors fail to master each of these steps. While most investors are great at picking an investment, too many are awful when it comes to research and execution. And, you know what they say about failing to plan? Failing to plan is akin to planning to fail. Because they fail to plan, many investors unnecessarily lose money over time.
Investing Success 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. Why? Because of this simple truth: To become successful in investing, your strategy must be absolutely boring. Let’s put it this way—your investing strategy should be less exciting than watching paint dry.
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 gold? How about 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.
What Happens When You Apply Discipline (and Boredom) to Investing?
If you’ve ever done research on investing (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 trumps 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. (For related reading, see: The Importance of Diversification.)
But, 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. Looking to complete a marathon? You’ll likely need to stick with a training regimen. Are you looking to connect with a special someone in your life? You’re going to need to put some effort into finding your ideal mate.
Financial Media Is Fake News
All of the above explains why so much of the financial media is fake news. 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. (For related reading, see: Fake News Is a Real Problem Among Teens.)
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—things like marijuana, bitcoin, gold or dividend investing.
Let’s face it: real financial advice is very, very boring. But, it works.
Financial Success in Itself Is Not Entertaining
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 works. It saves you fees for late payment and prevents the water from being shut off.
Are you going to hear about that on the nightly news? Of course not.
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 instead, and you’ll almost always end up ahead.
(For more from this author, see: Is Your Portfolio Ready for a Market Crash?)