Weekly Thoughts 13 October 2017

I mentioned a while back that maybe I’d write about the danger of over-thinking your investments. Let’s see if I can get down ‘on paper’ what it is that has been going through my mind.

I often have the thought or make the statement around various things of ‘what am I going to do with that information?’ Implying, why do I therefore even need to seek or know it. Rather don’t stress myself with knowing it or do something else with that piece of time. Sometimes when I train I don’t wear my heart rate monitor. Because I don’t always need to know that information. When I recently raced the World Canoe Marathons, of what importance was the information from my GPS of how long the race was taking me or how fast I was going? Not much at all. In a race like that, you race reactively to those you are competing against. You are not racing against time or speed therefore it means little. Older categories (us old men raced in categories of every 5 years of age) were sometimes faster than younger categories, because the competitors in that event were creating a different contest and needed to race with more urgency.

Why do we really need to know what the stock markets have done on a daily basis, likewise the exchange rates? What am I going to do with that information? Nothing. Sure, there are minor exceptions of people who in their business with are trading internationally on a daily basis and need to know the rates, but most of us don’t. Even monthly, why do I need to know what the markets are doing? Think about it. What are you going to do with the information?

Does someone living off the dividend income of a large share portfolio that pays good, reliable dividends, need to bother themselves with the value of their portfolio on a monthly or quarterly or even annual basis? What are they going to do with the information? I made such a comment to an elderly gent in the change rooms at my Canoe Club recently. (Don’t have a visual here). He was muttering about the stock market value. Knowing that he was more than wealthy and lived on dividends, I said to him the value is irrelevant. What are you going to do with that information, I said. He hadn’t thought about that.

In investing, one day shows us nothing. One year not much at all either. A few years, a little. Ten or fifteen years, something much bigger. Twenty or 30 or 40 years, something very significant. Demanding short term benefits and explanations – this is overthinking things.

We need to leave things alone to experience the compound factor. We have no idea what valuations will do. Keep it simple and be careful of speculation, just because you think you might miss out. The odds that the markets, and any investment including a property, will experience a high rate of volatility in value is 100%. So don’t think it through too much. Choose with intelligence and reason and leave it alone. Then go play golf or ride a motorbike or sail a boat or run your business or do your job.