Allan Roth is an adviser and investment writer based in Colorado.
He explains why so many people seem to seek excitement in investing.
“I think there’s a couple of reasons. Number one: human nature wants excitement and we want to feel like we’re in control, like we know what’s going to happen. And then two, the industry doesn’t make a whole lot of money off, of people buying the broadest market cap. So, the industry uses out emotions against us”.
Furthermore, Allan shares his opinion of investment magazines and newspaper money sections.
The messages they put out are often very appealing and difficult to ignore.
“Yes, absolutely. I wrote an undercover column called The Mole, which was an inside look at my industry. Of course, no-one’s going to buy a magazine that says minimize expenses and emotions, maximise diversification and discipline, understand that we don’t know the future, rebalance, etc. I wouldn’t buy that magazine”.
Simply put, the financial media needs to entertain to generate income and sales. If you can’t see it as entertainment, you might just want to ignore it.
Allan’s advice: Try to ignore all of that.
“Whenever you see a prediction, ask yourself, do they know something that the market doesn’t already know? Everyone said: ‘Interest rates’ were ‘going up’. ‘The Fed’s going to increase rates’. And guess what? The Fed increased rates (the overnight rate, in the US) and bond rates went down. Because that information was already priced into the market. The more you think you know what’s going to happen, the more likely you’re following the herd. “
Interestingly, Allan admits he does allow himself just a little entertainment as an investor.
“It exercises a piece of my brain that wants to have a little fun. Because the index funds are incredibly dull and boring. And I set rules on my gambling fund portfolio. So it’s okay to do that as long as you have rules”.
Investing isn’t supposed to be exciting. If it is, you probably aren’t doing it right.